Getting Ready

Sun, Jun 9, 2013 - 1:42pm

I suspect we are about to have a rather consequential week, therefore, here's a Sunday post to get you started.

There's certainly a lot of disgust and angst out there at the price action from Friday. Put me in that category, too. The U.S. unemployment rate rises from 7.5% to 7.6% and it's used as a rationale for a 2.5% selloff in the price of gold? Uhhhmm...yah...that makes a lot of sense. I guess what doesn't make sense is going over it all again as I made my frustration pretty clear in the previous post. In the end, the desperate scheme of The Bullion Banks to transfer as much short obligation onto the backs of the Specs continues unabated.

This week's CoT report showed next-to-nothing in terms of weekly changes to net bullishness or bearishness. The real action, though, sprang forth from the monthly Bank Participation Report. Again, it is this report that many analysts use to calculate the net long or short positions of the individual Bullion Banks...and this month's report is a doozy!

The report shows that not only are the major Bullion Banks no longer net short, they are actually NET LONG gold futures. I've seen one report that suggests this is the first time the Bullion Banks have been NET LONG since 2001. I've also seen a report suggesting that JPM itself is now net long as many as 50,000 contracts! IF this is true, and it's simply a matter of correctly interpreting the data (of course the DATA ITSELF has to be accurate), then there can be NO DOUBT that the precious metals are on the verge of a MAJOR BOTTOM followed by a ferocious rally.

The only thing I'd like to add to the discussion is the rationale for JPM's move into NET LONG territory. The shortages in their gold vaults has been well-documented and clearly this has much to do with it. But there seems to be a lot of curiosity this weekend as to how JPM can be net long so many gold contracts yet still be net short so many silver contracts. The answer likely lies in offshore and OTC positioning, but as this relates directly to The Comex, I think that part of the JPM gold position is actually a hedge against their remaining silver position. Huh? Let me explain.

As you know, I watch the OI and CoT levels pretty closely and I've been banging the drum pretty hard for months about the unusual and exceptionally large Comex Commercial GROSS LONG position. This gross level of Commercial long contracts has historically and consistently fluctuated between 30,000 and 45,000 for the past several years. At price peaks, the gross level would be close to 30,000 and, at price bottoms, the number would rise to somewhere near 45,000. Essentially, these "other commercials" added contracts at lows and then closed them out at highs, making a tidy profit from anticipating how JPM was going to once again fleece the Spec Sheep.

Well, something flipped with this last price cycle. At the lows of last August, the Commercials had again built up a large gross long base (47,797) and, by the time price was capped at the announcement of QE∞ in mid-September, this position had been trimmed back (32,206). During this entire Cartel operation in the nine months since, you would have expected that the Commercial gross long position would have grown again. But, would you have expected this?


8/14/12 $27.78 47,797

9/11/12 33.46 32,206

10/23/12 31.66 35,786

11/27/12 34.03 42,525

12/31/12 30.29 45,415

2/5/13 31.79 46,293

3/12/13 29.13 51,929

4/9/13 27.97 61,060

5/7/13 23.94 65,703

6/4/13 22.52 66,857

OK, so what the heck does all this mean? I'll try to bring it all together in some sort of coherent form:

  • Caught flatfooted and enormously short paper metal at the initiation of QE∞, a deliberate and calculated plan has been orchestrated by the major Bullion Banks, in particular JPMorgan.
  • By driving price the price of gold almost $400 lower, The Gold Cartel has been able to reduce their general liability by nearly 80% ( and, by virtue of the latest Bank Participation Report, some Bullion Banks have been able to move NET LONG for the first time in over a decade.
  • If reports are correct the JPM has flipped from 50,000 net short to 50,000 net long, we must conclude that the operation to smash gold is close to complete.
  • However, even though silver has been smashed a greater price percentage than gold, JPM has been been blunted in their attempts to completely cover their net short silver position as the "other commercials" (who at least on the surface don't appear to be JPM itself) have added at least 20,000 more longs than they have historically ever carried.
  • And notice that the gross long position shown above has continued to rise, even in the face of sharply lower prices over the past eight weeks. These are some very deep pockets that, clearly, are not being shaken out. Instead of selling on further weakness, they continue to add.
  • JPM could attempt to jam silver prices even lower in an increasingly desperate attempt to frighten these longs but at what cost? By doing so they lose big on their gold position and further exacerbate their already tenuous physical/deliverable gold position.
  • And it is this "juggling act" that leads me to think that this entire operation, which began a brutally-long nine months ago, is nearly finished.

You see, by moving so deeply long in gold futures, JPM has effectively hedged much of the remaining silver short position that they've been unable to cover. At its most basic level...if they are forced to cover silver into a rising price, the potential losses they'd incur will be more than equaled by the gains they'd show in gold. (Just for fun...If you're long 50,000 contracts and price rises $500 back to the August 2011 highs, you make $2.5B!)

Now, all of this is well and good and NO DOUBT foreshadows much higher prices for both metals in the weeks ahead. However, none of this is going to matter much to the Spec HFTs which are expected to pounce on the metals this evening, particularly in silver. The fact that China is "closed" through mid-week will only serve to exacerbate the paper price volatility. However, IF I'm right about the ideas laid out above, price should show surprising resilience this week. Gold has been very well bought each and every time that attempts have been made to drive it down through $1350. Let's see if this continues. Silver, too, has hung tough around $22 and has bounced back twice from "shock lows" near $21.

So, I'll close this post the way I began. This is going to be a very consequential week for the that will tell us a lot about the short-term and intermediate trend for price as we head into summer. Nearly every indicator that I've traditionally followed is indicating that a bottom is near and trend change is coming. Let's see where we go from here.


About the Author

turd [at] tfmetalsreport [dot] com ()


Green Lantern
Jun 9, 2013 - 9:59pm

Re: Alistair

Let me give you a street view of government. Alistair is a good man, batting for the right team, with good interviews but his description is a little sanitized for my tastes. He needs to put a little more snot on his commentary.

Goverments prime directive is Power! Maintaining and expanding it's little sticky hands in places it doesn't belong. The only way an individual has power is through an institution. Immutable law #1. You must create institutions and corporations to serve your power interests for that is the venue in which you can yield your power.

Kensyian and socialist agenda's by it's very nature limits the power of the people and gives more power to government. It reinforces slave like behavior and throws scraps to those who can't and those who won't by taking from Peter and giving to Paul. It sets the bar low for society by telling people, this is the best you can expect. You need us for we are looking out for your best interests. Thank FDR for that with all his socialists reading.

Governments expand the money supply to support the prime directive. Power and expansion. Not service. If the only thing governments build were bridges, and hospitals we'd be ok. But even having their noses in hospitals and schools where they direct the agenda is a dangerous gambit. It brainwashes your children and creates closed markets. Again the rule is institutions are needed for power holders and schools become not a venue to create healthy thinking children but children who are brain washed on government agenda's

The Common Core Curriculum Your children on government books.

Indoctrination in Common Core ELA Texts

By far the #1 reason, governments expand money supply and feed money to banks who are insolvent is again, they need those institutions to serve their greater agenda-POWER! Power requires the end of a gun and lots of them. They need think tanks and high paid consultants to tell government how to use those guns, big PR firms to tell government what to tell the public.

During Hurricane Katrina when the city flooded because of old and ill taken care of flood walls, did anybody ask what happen to all the tax payer $ that was supposed to have been put into infrastructure? Of course the very same Mayor who cried that government didn't come to his aide quick enough was indicted on multiple charges of using his power to profit. Volumes of books could be filled on how governments all around the world give priority to the prime directive while ignoring the needs of their brain washed citizens.

The harvard economists are also brainwashed just like everybody else. They are all Keynesian because their teachers were kensyian and so when Obama picks up the phone to ask for advice, who does he get?? A Keynesian. My parents wasted their money sending me to college learning macro/micro economists with a bunch of marixst professors. I had to relearn everything.

Jun 9, 2013 - 10:31pm

Karen Hudes Update

This is an interview she did with Ernest Hancock last Thursday. Ernest is a self proclaimed anarcho capitalist. Ernest does a good job letting Karen get her message out until the on air show comes to an end. He then has an off air discussion with her that is really interesting. I think the whole interview is very well done, but I think the points Ernest makes in Pt 4 are GOLDEN.

KarenHudesErnieHancock130606 1 4
Fred Hayek
Jun 9, 2013 - 10:38pm

No understanding but belief and trust in some greater persona?!

Someone earlier softly sneered:

Especially given that most of your audience don't bother with understanding and invest based on belief and trust in some greater persona.

I can't find my dictionary. Is "some greater persona" a synonym for inescapable math? Just wondering. Because I see numbers like $16 trillion of debt, like $1.2 trillion more debt every year, like $60 trillion or more of unfunded liabilities and I see inescapable math. I see mathematical reality with the pull of a fvcking black hole yanking in and destroying whimsical, pixieish beliefs that things will all just work out and everyone with all their money in equities will be just fine, crushing to subatomic essence normalcy bias that things are like this now and goddam it, they'll always be like this. I need to get myself a thesaurus and look up this "greater persona" term. Must be new.

The Watchman
Jun 9, 2013 - 10:49pm
Jun 9, 2013 - 10:54pm

Edward Snowden-My Hero

First of all, I urge any who have not watched the video at the links provided by wouldyoubelieve or Turd to do so.

This young man gave up everything, including possibly his life, because he could no longer tolerate what his government was doing. Being an insider, he was only too well aware of the consequences he faced.

His statement, "I don't want to live in a society that does these sort of things," I think is a less dramatic equivalent of Patrick Henry's "Give me liberty, or give me death."

I found it saddening that his greatest fear was not what would happen to him, but that after putting his neck on the chopping block, nothing would change.

It is our duty as American citizens to make sure this doesn't happen. He deserves all the support we can give. How many more chances will we get before they flip the switch and we enter, in his words, "turn-key tyranny?"

Jun 9, 2013 - 10:55pm
Jun 9, 2013 - 10:56pm


Up on Globex!

Jun 9, 2013 - 11:22pm

BREAKING: US Embassy In Kabul


Explosions and gunfire heard near Kabul airport
Suspected militants have launched an attack close to the main airport in the Afghan capital, Kabul, security forces say.

Witnesses reported the sound of explosions and gunfire coming from the airport shortly after dawn.

It is not known if there are any casualties.

The airport is home to a large Nato-led military base. One report said the US embassy in Kabul had sounded its “duck and cover” alarm.

The embassy also announced on loudspeakers that the alarm was not a drill, AFP news agency said.

Large explosions heard coming from NATO headquarters at Kabul airport in Afghanistan


Weasel Tracker
Jun 9, 2013 - 11:23pm

Silver price vs. mining profitability chart and Volcan mining

Mining Costs of Silver Miner: Volcan Compañía Minera
Jun 9, 2013 - 11:30pm

another Embassy

how convenient (in my best churchlady voice), I know cynnical, but come on people, here's the big question, is this whistleblower evidence the Rubicon? or do the sheeple just go quietly back to DWTS and then sleep?

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