An Amazing CoT and BPR for Gold

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.


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:


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:


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.


About the Author

tfmetalsreport [at] gmail [dot] com ()


Jul 8, 2013 - 11:41pm

More negative than 2001 & 2008

In 2001 the 1 month GOFO rate turned negative, in 2008 the 1 & 2 month GOFO turned negative. TODAY (08 Jul 2013) it is the 1,2 & 3 month rates that are negative! What about tomorrow?!

They're gonna wanna keep this quiet.

Jul 8, 2013 - 11:41pm

Harvey's Up!

DS: If TF is right and a gold rally of epic proportions is upon us, then we should also see a dollar crash of epic proportions and the collapse of the Western economies. • Bloomberg: Gold demand internationally remains robust - especially in Asia. China’s gold imports from Hong Kong for May jumped over one third from April, confirming again that Asian buyers shrewdly buy on dips in price. In Japan, gold bullion demand in 2013 is twice the levels seen in 2012. ​• DeviantInvestor: The stage is set for a JPM managed rally to take advantage of their net long position, having dumped their shorts in the last two engineered declines in gold and silver. However, it is possible that their agenda is to generate further support for the dollar and additional declines in gold and silver. With essentially unlimited financial backing, their ability to create and sell huge quantities of PAPER silver and gold and a "free pass" from the regulators, they can overwhelm technical indicators, oversold conditions, and sentiment if they so choose. • Bloomberg: Imports into Turkey, the fourth-biggest consumer, more than doubled to a 4 1/2-year high of 45.5 tons in April. They held above 43 tons in May and June, the longest run in data on the Istanbul Gold Exchange’s website going back to 1995. • Ted Butler: There is undeniable proof that the recent price action on the COMEX in gold and silver is the new and manipulative version of the law and supply and demand. Adam Hamilton (Zeal Intelligence): Investors simply want to buy things that go up. That is why gold has thrived many times in rising-yield environments. ​• Bundesbank Warns China's Currency "On Its Way To Becoming Global Reserve Currency". • Zero Hedge: On Friday, Brinks saw 24% of its entire registered gold holdings, or 133k ounces, quietly get withdrawn. This, together with the moves in JPM and HSBC inventory, meant that total COMEX gold holdings dropped by 116K ounces to a new low not seen for the first time since 2006. • Chris Powell: Reuters reports today that 60 percent of the gold mining industry in South Africa is now estimated to be unprofitable, but there is not a peep from that industry. All this and more in...

The Harvey Report!


Jul 8, 2013 - 11:33pm

Ok whatever

How to Retire with Over $4.3 Million on Only $197 Dollars per Paycheck

Quick Tip for College Grads

magine you make $40,000 annually working for a corporation that offered dollar-for-dollar matching on contributions up to the first 4.5% of salary. You are in the 28% tax bracket. To save $10,000 is going to be far easier than you think because you are dealing with a number of variables that are often not obvious. Let me illustrate.

Say you saved 20% of your income and had it put into your 401k, amounting to $8,000 each year. This one move will result in a savings of $2,240 on your tax bill, plus $1,800 in company matching will be deposited into your account ($40,000 x 4.5% = $1,800.) By investing the $8,000, you’re already $4,040 wealthier; that’s a 50%+ return on your money without taking any risk simply because you were empowered by having knowledge of the tax laws! At the end of the year, your 401k would have $9,800 added to it. If, instead, you chose not to invest in your 401k, you would take home an extra $5,120 in your paycheck after income taxes, payroll taxes, etc. But ask yourself which you would rather have: An extra $5,120 in your paycheck each year - $197 per bi-weekly paycheck - or $9,800 deposited into an account that can grow tax-deferred for decades?

The answer isn’t difficult. Were you to start this course of action at 25 years old and maintain it until you were 65, at a 10% compound annual rate of return, you would retire with over $4,337,000 in your 401k. That’s not a joke, nor is it a typo.

Jul 8, 2013 - 11:30pm

Mud butt

"Mud butt" = muck ass

Jul 8, 2013 - 11:22pm

I may be jumping the gun on this but what the heck...

It is pretty nice to see some positive action. ;-)

Video unavailable
Jul 8, 2013 - 11:20pm

S Roche: It also went

S Roche:

It also went negative in 1999, and not much happened as I recall, though that is probably because of the desperate action of central bankers, actions that they likely can't or are not willing to repeat (ie dumping gold).

Do you have any data stretching further back? Say to 1968?

Jul 8, 2013 - 11:19pm


I also noticed the "S. Roche" at the foot of the ZH Article and also wondered if it was written by our very own behated Swiss Drug Guy.

ZH Articles normally attribute authorship at the top of an Article not the bottom, which raised some doubts as to the above.

S Roche
Jul 8, 2013 - 11:09pm

Hey Mud-Butt! re GOFO & Tyler Durden

I hope you don't mind but I love that name....or is it a condition?

I didn't write that post, the Tylers did, but they gave me a h/t for alerting them to the LBMA GOFO report:

when their BBerg terminal was not updating GDLRG1M (GOFO) all day.

To those that are asking what it may mean*, is that the bottom is in for gold and about to run hard higher. This signal was last seen in November 2008 just after the lows and before that in March 2001 at the beginning of the bull market. From looking at the trading around those dates it is very volatile so be careful chasing the price in the first week, there is usually a big retracement before the uptrend is confirmed....maybe the bears will attack Wednesday to celebrate the FOMC minutes.

*the only dissenting opinion that I've read is that with interest rates so low the negative GOFO signal may not mean as much this time as it did previously, but fwiw I am backing up the trading truck over the next week or so. (And I bought more phys Friday). GLTA

Jul 8, 2013 - 11:04pm

FOFOA on GOFO rate

This from FOFOA may help anyone understand the GOFO rate, and the difference between gold leases and gold swaps;

"The GOFO rate is basically a measure of unencumbered physical gold's desire to bid for dollars. And the lease rate is the banks' bid to borrow your gold so they can sell it and then do whatever it is that banks do with your money.

So the message of a high lease rate is "lease us your gold, PLEASE, and we'll pay you handsomely for it." Remember, a lease is where you "rent out" an asset to derive an income stream. And a swap (like GOFO) is where you need a loan, so you offer an asset as collateral and then YOU pay the income stream to someone else. Only with a negative GOFO rate, you retain control of the gold PLUS you receive the income stream coming in, so why would anyone LEASE their gold in this backwardation scenario?"

and, backwardation poetically described;

"...But in a strange way backwardation is kind of like AIDS to the fiat money system. Once it's in there, you can't get it out. And you can't actually see the HIV virus. All you can see are the antibodies that attack it. That's how you know it's in there, eating away at the system."


Would I be right in suggesting that a negative GOFO means that by agreeing to loan your gold to someone else, you keep it and they pay you interest for borrowing it from you (ie. you keeping it)?

Jul 8, 2013 - 10:55pm


The reason for buying gold and silver is for wealth preservation and savings. Cashing in your savings for needed or better uses is the entire point.

If you have an immediate need. use it for what it is for.

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