An Amazing CoT and BPR for Gold

141
Mon, Jul 8, 2013 - 4:57pm

Released just this afternoon, the July Bank Participation Report and the latest Commitment of Traders Report are so interesting that I felt they justified this new post.

So, let's dive right in. I'm not going to spend much time talking about silver because the data is somewhat skewed this week by the expiration of the July13 contract. The Large Specs added 3800 net long and the Commercials added 3700 net short, all due to expiration and rollovers and now we see why silver outperformed gold by such a wide margin last week.

The reports for gold, on the other hand, are astonishing. Let's start with the CoT. For the reporting week, price fell by $32 while total OI rose by 19,752 contracts. Check out these internals:

Large Specs dumped another 6,200 longs and added 7,200 additional shorts. This brings their net position down to just 20,700 contracts and drops their total net long ratio down to a preposterously low 1.15:1. Again, for perspective, shortly after QE∞ was announced last fall, the gold Large Specs were net long over 210,000 contracts. This means that, in the time since, they've been coerced into dropping their long exposure by over 90%.

On the all-important flip side, The Gold Cartel added another 21,427 new longs last week through the Tuesday cutoff. Because they also added 8,995 new shorts, their net short position only declined by over 12,000 contracts. However...and here comes the amazing part...their new net short position is just 22,776 contracts, roughly 70 metric tonnes of paper gold, and their updated net short ratio is also preposterously low at 1.12:1.

Remember, this entire "event" from the announcement of QE∞ last fall to today, has been staged in order to give The Bullion Banks the time and the ability to cover their massive paper short position. When QE∞ was announced in September of last year, the total Cartel net short position was 737 metric tonnes of paper gold. As of last Tuesday, they are now net short just 70 metric tonnes. That's an incredible and amazing drop of over 90%.

Now get this, the CoT survey was taken last Tuesday. On Wednesday and Friday of last week, the total dollar move in gold was down another $32. Over those two days, the total open interest n gold rose by 18,561 contracts. It recent form follows, then it is safe to conclude that the vast majority of this new OI was contract initiation on the short side by the Large Specs. If that's the case, then we headed into last weekend with a total Gold Cartel net short position as low as 5,000 contracts. TOTAL!! And now you see why I find this so incredible and amazing.

Next let's consider this month's Bank Participation Report. This aggregated report gives us a once-a-month look at the gross positions of those traders classified as banks, both U.S. and non-U.S. Now check this out...let's start with the report from last October so that you can see from another perspective just how steep the changes have been in the nine months since.

GROSS LONG GROSS SHORT

U.S. Banks 40,625 146,809

Non U.S. Banks 34,881 113,445

TOTAL 75,506 248,254

And now here are the numbers from last month (June). Note that the banks had moved from net short position of 172,748 to a small net long position of 4,582. This got everyone's attention and was well summarized here: https://jessescrossroadscafe.blogspot.com/2013/06/cftc-gold-and-silver-bank-participation.html

GROSS LONG GROSS SHORT

U.S. Banks 56,751 27,129

Non U.S. Banks 24,035 49,075

TOTAL 80,786 76,204

Well, we've all been waiting with baited breath for the July report and it just came in a few minutes ago. Would the banks continue to cover on these falling prices or were they adding to the downside momentum? We got our answer:

GROSS LONG GROSS SHORT

U.S. Banks 69,565 24,939

Non U.S. Banks 34,904 58,565

TOTAL 104,560 83,859

The total net long position grew by over 16,000 contracts to an astounding 20,701. But drill a little deeper...The U.S. banks actually added net longs of 15,000! The only thing holding the overall net position in check was the 9,500 new shorts put on by non U.S. banks (HSBC? Scotia? Barclays? UBS?) Do you think that The Fed warns, plans and advises the non-U.S. banks as clearly and succinctly as they do the U.S. banks?? The Fed IS the U.S. Banks. If Barclays or UBS is too stupid to see what's going on and they are actually adding shorts at these prices, well Hells Bells, go right ahead! Their selling simply allows the U.S. Banks to cover even more!

Look, I know these past nine months have been brutal and we've all suffered through the almost-daily pain of continued losses. But this is almost over! Yes, prices may continue lower, stopping and turning who knows where. However, I am 100% confident in my analysis of The Big Picture here. The major, too-big-to-fail, Fed-Primary-Dealer and Bullion Banks have now fully gotten themselves out from under what had been an extraordinarily wrong-footed net short position of over 146,000 contracts last autumn. They are now net long nearly 45,000 contracts! (And certainly more than that after last Wednesday and Friday.) That flip of 191,000 contracts took place while price declined by 30% from $1800 to $1250 and represents a change of position equaling over 595 metric tonnes.

Please, I beg you, remain patient and continue to stack physical metal. You will soon be rewarded with a rally that will surprise even the most ardent of bulls.

TF

https://news.goldseek.com/COT/1373312054.php

https://www.cftc.gov/dea/bank/DeaJuly13f.htm

About the Author

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turd [at] tfmetalsreport [dot] com ()

  141 Comments

  Refresh
department of truth
Jul 9, 2013 - 4:59pm

More on the dollar breakout

The Treasury department and Fed have just identified some new, immense deposits of ink and paper, which have boosted their known reserves by many orders of magnitude!

Stand buy for the dollar to go ballistic!!!

They believe this should allow them to create enough US $$$ to purchase most of the rest of the world before they run out, and start a new currency.

hai
Jul 9, 2013 - 4:10pm
gold slut
Jul 9, 2013 - 2:40pm

More Au...

Got delivery of my first quarter maple today. All my prior purchases have been (roughly) quarter ounce sovereigns but I thought a bit of variety would be nice so it was a quarter maple. I have to say, although I like the sovereign a lot, maples are very, very pretty. Will be getting more of those for sure, and it is nice to get some four-nine purity Au. I like quarter ounce lumps because when (in retirement) we need a new washing machine or fridge, an ounce is a bit of a big denomination to cash-in and quarter ounce lumps give you much more flexibility.

Used Bullion By Post for the purchase and the service was flawless. Ordered Sunday night, paid cash at the bank Monday morning and have it in my hand Tuesday! Gets my recommendation and I will be using this company again without a doubt (and for a certified grumpy-old-man that is praise indeed!)

NonoverlappingMagicCereal
Jul 9, 2013 - 2:40pm

Conviction

But your basic conviction about the ultimate outcome has always been rock solid. I appreciate that. And I share your conviction, as do many others. It is sometimes hard, as a man who has bet all,( even though not much compared to some), on the ultimate price upward of silver. Even now facing eviction from a hideous landlord.... I will not sell. Thanks Turd

I do not understand why holding convictions about the macroeconomic state of the world is considered to be admirable. They may be comforting, but when they part ways with reality they will not pay your bills :(

dropout
Jul 9, 2013 - 1:55pm

Under the Sun

There is nothing truthful, correct, free, nor without control and manipulation under the sun, about todays global financial marketplace. Period. This is done with governmental and judicial cooperation. It is condoned.

If LIBOR can be manipulated, why not the GOFO? Every other market has the footprint of control and manipulation on it, including the worlds mints. The US mint does not report it's mintage numbers in a timely fashion, attributing production from one month to another, so as to "even" out the demand.

To expect anything reported, from statistics to prices, as being truthful and above board, is to have those expectations destroyed, in todays global financial cesspool. What remains is a solid belief in the ownership and self retention of physical gold and silver. These precious metals have and will stand the test of time. These are the ONLY things that you may solidly "count" on.

JackPutter
Jul 9, 2013 - 1:41pm

A little on the Mechanics.....

of arriving at the GOFO. This is an older article from Antal Fekete's teaser for a seminar.

"In the meantime, here is a hint to whet your appetite. Fofoa should refine his indicator GOFO as follows. GOFO = LIBOR - GLBR, where GLBR = gold lease bid rate, i.e., the rate which bidders are willing to pay for leased gold to the bullion bank. It should be somewhat greater than GOFO as it has been defined up to now. (Why?) It is true that GLBR is not publicly quoted, but a little bit of sleuthing should be able to produce a proxy. Then GOFO will tell you how profitable the gold carry trade is, or is getting. Negative GOFO tells you that it is making a loss and net shorts in gold are under water or will soon be."

https://www.safehaven.com/article/17629/gold-basis-screwed

Strongsidejedi
Jul 9, 2013 - 1:19pm

comments on real estate and gold

I find it interesting that the banks are unwinding their short position in precious metals now.

The banks / Fannie/ Freddie/ FED were addressing bad real estate investment vehicles over the past several years.

The hedge funds seem to have bought up alot of those bad Residential units off the ledgers of the banks.

Now, we observe hedge funds buying the short positions from those same banks.

Why would the hedge funds (1) buy the bad real estate units and then (2) buy the short positions from the banks?

It seems to me that the hedge funds have become the "bad vehicle". Where are the hedge funds getting their capital?

Is Goldman Sachs capitalizing the hedge funds? If so, are those hedge funds then scooping up the foreclosed homes and then buying short positions from the TBTF banks while Goldman and the TBTF banks go long on gold/silver?

unfashtandich
Jul 9, 2013 - 1:12pm

Hey Turd,I appreciate your conviction

It would be easy and maybe tempting to hedge your bets......phrase your predictions so you would be right either way it goes. But your basic conviction about the ultimate outcome has always been rock solid. I appreciate that. And I share your conviction, as do many others. It is sometimes hard, as a man who has bet all,( even though not much compared to some), on the ultimate price upward of silver. Even now facing eviction from a hideous landlord.... I will not sell. Thanks Turd

Salisbury House
Jul 9, 2013 - 1:06pm

Don`t get too excited over

Don`t get too excited over the COT numbers. What is happening is the miners are just unwilling to hedge as gold drops daily, weekly, monthly to new lows.

TechTrade
Jul 9, 2013 - 12:59pm

Daily Buy signal in Gold

Now have a confirmed daily buy signal in gold, pullbacks to 1225 - 1240 should be bought. A breakout through 1265 should take us up to 1350 area. Action there will determine whether the lows have to be retested once more, or it breaks out. But this area of 1220-1245 should be a pretty safe area to buy.

Better to be buying after some upward momentum is established, and buy signals are being generated, rather than trying to catch the falling knife and keep buying into a bottomless pit. If you're able to buy in $50 from the lows, it's a lot better than keeping buying on the way down, and watch it go $100-150 or more against you, IMHO.

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