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

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  141 Comments

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StevenBHorse
Jul 9, 2013 - 9:46am

Re: Notice from ZH

The same Bullion Banks have larger parent companies that set the LIBOR.

As follows.

Libor is calculated and published by Thomson Reuters on behalf of the British Bankers' Association (BBA). It is an index that measures the cost of funds to large global banks operating in London financial markets or with London-based counterparties. Each day, the BBA surveys a panel of banks (18 major global banks for the USD Libor), asking the question, “At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?” The BBA throws out the highest 4 and lowest 4 responses, and averages the remaining middle 10, yielding a 23% trimmed mean. The average is reported at 11:30 a.m.

It's no stretch of the imagination to believe that the same banks that rig LIBOR also rig the GOFO, and every other rate set in the same manner. Where is a good RICO lawyer when you need one?

Big shout out to my dude Roche for pointing this out for everyone. The ZH h/t is another feather in your prestigious cap.

Neigh.

department of truth
Jul 9, 2013 - 9:29am

$100,000 gold

yep, and $1,000 per gallon gas, $2500 Big Macs, $1500 loaves of bread, all in the not terribly distant future

Meanwhile, I think the Fed will soon have to stop the route in the bond market with some sort of announcement regarding QE (come on, do you think they really plan on stopping it?), which of course will lead to a big stock market rally and set the stage for another smashdown of gold and silver.

In fact, I think the Boyz already have their trucks backed up to the rear entrance of the COMEX, GLD,and SLV vaults . . .

Adolf_Hitler
Jul 9, 2013 - 8:52am

@Spartacus Rex

I don't think the 1970s analogy holds water. Back then, there was NO such well-developed derivatives market. There was NO the-tail-wags-the-dog pricing mechanism. Gold was largely a physical market. Gold was down because of the IMF and Uncle Sam auctioned a lot of gold and the gold market needed some correction.

https://www.alhambrapartners.com/2013/04/27/sunday-gold-fix-the-gold-cra...

However, now the physical market is extremely tight. There is a shortage of gold supply. The gold price was down just because of the paper manipulation.

Big Buffalo
Jul 9, 2013 - 8:01am

Watching

Spot prices I'm watching today.

Silver, if we can stay above/bounce off of 18.90, we're good.

Gold, if we can stay above/bounce off 1240, we're good....at worst we must stay above 1220.

If these level don't provide support, we're in for another nasty day/week/month.

Wizardtmosley
Jul 9, 2013 - 7:50am

@TMosley

People really need to understand that when markets are controlled by small groups of men, they are literally IMPOSSIBLE to predict (especially when those people look at your words, determined to make something different happen, to try to prove their godlike control),

This I think is the elephant in the room that gets overlooked a bit too often. If in fact it is the main objective to shake loose as much physical metal as possible. That is the exact way it would be done. When the enemy (Stackers) believe and discuss that metals will go one way, The Powers That Be monitor conversations and make it go the opposite way through what ever means are available to them Legal or Illegal. Then send in some Trolls to pile onto the frustration and pain of seeing an investment value drop.

The saving grace for some I believe is the ability to understand the fundamental difference between Paper Metals and Physical Metals. Two completely different animals in my twisted mind also the ability to recognize when something is being controlled and manipulated and not place more resources into it than can be afforded to ride out such a manipulation storm (Just My Humble Opinion)

W

DeaconBenjaminSE
Jul 9, 2013 - 7:41am

goods and services are priced in ounces

During the Weimar hyperinflation, there was a constant need to reprice the merchandise in stores. Eventually someone chose to price their products in a stable currency (in this case the British pound) and calculate the exchange rate at the register. If there is no mechanism for metal based debit cards, a similar exchange could take place on paper terms today. If 50 pounds of pinto beans are a quarter ounce, you could pay with a silver quarter and dime, or a paper equivalent.

Byzantium
Jul 9, 2013 - 7:31am

Notice this from the ZH article?

How are the GOFO means established?

At 10.30 am London time, the Reuters page is cleared of all rates. Contributors then enter their rates for all time periods. A minimum of six contributors must enter rates in order for the means to be calculated. At 11.00 am, the mean is established for each maturity by discarding the highest and lowest quotations in each period and averaging the remaining rates.

I highlight in bold the pertinent point. My understanding is that the bullion banks are in cahoots together, and collude as one team. It is possible to offer exceptional and extraordinary rates to the market through a nominated bank, and for it to not affect at all the reported GOFO rate. The other rates would be set to send a signal to the market if necessary as an 'advert' to lease gold to them, while concealing from market watchers, the desperate rates that the designated cartel bank will actually pay, on behalf of the greater cartel.

Does my speculation have merit?

heyJoe
Jul 9, 2013 - 7:18am

Sinclair in Chicago - Clarification

From an earlier post, I want to clarify the point I made about the derivative market. It is estimated that the notional value of the derivative market is $700 trillion. The banks are carrying huge losses, but no one knows the amount of losses. Jim said if they are just 10%, easy to see the impact. What triggers the devastation are rising interest rates.

Sorry for the confusion. Hope this helps.

ChewYourOwnFaceOff
Jul 9, 2013 - 7:15am

Another bullish COT report

I'm prepared for another one-day 5% drop

s1lverbullet
Jul 9, 2013 - 7:03am

And Silver....

Gives all of its spike back. What else is new?? Wake me up when we break out and hold onto it for a week.

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