Summarizing The Latest BPR

123
Thu, Sep 12, 2013 - 8:07am

As you know, the CFTC-generated Bank Participation Report contains the evidence that the U.S. banks or, more likely a single U.S. bank, have "cornered" the Comex gold futures market. The latest BPR came out last Friday and it confirms that this condition still exists.

First, a refresher....What the heck is the "Bank Participation Report" anyway? It's a summary report issued by the CFTC, usually on the Friday following the first Tuesday of every month. As with all CFTC data, it is deliberately opaque in that individual firms are not specified. Instead, the report aggregates the positions of the four largest U.S. banks and the twenty largest non-U.S. banks. And just which firms are included in the report? Well, hands-down the largest U.S. bank in the report is JPM. They are the behemoth and likely 80% or more of the "U.S. bank" side of the report. The other banks that move onto and off of the report each month depending upon current positioning are TungstenmanSachs, MorganStanley and Citi. The "non-U.S. banks" include DeutshceBank, HSBC, Scotia, Barclays, UBS et al.

Before I begin, I strongly encourage you to research all of this yourself as I don't simply want you to take my word for it. This is very important stuff and you need to do your own homework, too: https://www.cftc.gov/marketreports/bankparticipationreports/index.htm

And you should also go back and re-read this post from last month because, in the end, this is where it's all headed: https://www.tfmetalsreport.com/blog/5018/evidence-gold-corner

Ultimately, what you need to understand is that this entire "correction", these painful 10 months of counter-intuitive selling, has all been schemed to the benefit of JPM and the other big, bullion banks. Caught massively short at the introduction of QE∞ last autumn, they had no choice but to smash price in order to cover. They had tried covering silver and gold into rising prices in 2011 with nearly disastrous (for them) results. They weren't about to make the same mistake twice so, instead, this recent selling scheme was hatched to create the conditions under which the banks could cover into lower prices, instead.

And it worked. Here's the data that illustrate the point:

DEC 2012 BPR (survey date 12/4/12 with price at $1706)

U.S. Banks: Long 37,790 contracts and short 144,183 contracts. Net short = 106,393 contracts

Non U.S. Banks: Long 35,326 contracts and short 80,033 contracts. Net short = 44,707 contracts (net short 2.26:1)

MAR 2013 BPR (survey date 3/5/13 with price at $1581)

U.S. Banks: Long 40,685. Short 86,924. Net short = 46,239 contracts

Non U.S. Banks: Long 29,219. Short 72,545. Net short = 43,426 contracts (net short 2.48:1)

Now something here should literally jump off the page at you. Price had declined $125 with much of it coming during a brutal, 2-day beatdown in mid-February but look at how the positions had changed! The non-U.S. banks had barely budged as their net short position had only declined by 1,281 contracts. The U.S. banks (JPM), however, had already trimmed their net short position by over 56% or over 60,000 contracts. Clearly, this strategy of inspiring lower prices and then covering shorts into the follow-on weakness created by a growing Large Spec short position was working beautifully. Why not keep going?? So they did....raiding price in mid-April. This intentional smash broke gold down through the bottom of its 19-month price range and inspired all sorts of "gold is now in a bear market" calls from the Gold Cartel, sycophant media.

MAY 2013 BPR (survey date 5/7/13 with price at $1453)

U.S. Banks: Long 59,829. Short 76,610. Net short = 16,781 contracts

Non U.S. Banks: Long 32,483. Short 54,957. Net short = 22,474 contracts (net short 1.69:1)

There are several things in this report that demand your attention:

  1. Price has now fallen $253 in six months. During this time, the U.S. banks have trimmed their net short position by over 84%. They've not only covered more than 67,000 shorts but they've added 22,000 new longs, increasing their gross long position by over 58%.
  2. The non-U.S. banks finally got the memo and used the weakness to lessen their net short position, too, cutting it nearly in half during March and April. Note the exact number here as this is important: As of 5/7/13, the non-U.S. banks were net short 22,474 Comex gold contracts.

JUNE 2013 BPR (survey date 6/4/13 with price at $1399)

U.S. Banks: Long 56,751. Short 27,129. Now net long, for the first time I can recall, an astonishing 29,622 contracts.

Non U.S. Banks: Long 24,035. Short 49,075. Net short = 25,040 contracts (with a net short ratio of 2.04:1)

This is a HUGE change for the U.S. banks. Note, however, that the non-U.S. bank net position is relatively unchanged. Price then bottomed three weeks later on Friday, June 28, at $1180.

JULY 2013 BPR (survey date 7/2/13 with price at $1246)

U.S. Banks: Long 69,656. Short 24,939. Net long = 44,717 contracts (with a net long ratio of 2.79:1)

Non U.S. Banks: Long 34,904. Short 58,656. Net short = 23,752 contracts (with a net short ratio of 1.68:1)

It's time to stop again and summarize:

  1. Over the course of these seven months, The Federal Reserve of The United States has created from whole cloth approximately $550,000,000,000. During this time, the price of gold has counter-intuitively fallen $460 or about 27%.
  2. The four largest U.S. banks that are actively involved in the Comex gold market have utilized this time to move from a net short position of 106,393 contracts to a net long position of 44,717 contracts. That's the equivalent of 15,111,000 troy ounces of paper gold or 470 metric tonnes.
  3. The 20 largest non-U.S. banks have also utilized this price weakness to trim their combined net short position from 44,707 contracts to 23,752 contracts. Though nothing like JPM's the U.S. bank move, this is still a reduction of 47%.

AUGUST 2013 BPR (survey date 8/6/13 with price at $1282)

U.S. Banks: Long 90,949. Short 31,476. Net long = 59,473 (with a net long ratio of 2.89:1)

Non U.S. Banks: Long: 25,957. Short 47,996 Net short = 22,039 (with a net short ratio of 1.85:1)

Note that the size of the U.S. bank net long position has grown but the ratio is nearly unchanged.

SEPT 2013 BPR (survey date 9/3/13 with price at $1412)

U.S. Banks: Long 69,510. Short 24,604. Net long = 44,906 (with a net long ratio of 2.83:1)

Non U.S. Banks: Long 23,626. Short 60,350. Net short = 36,724 (with a net short ratio of 2.55:1)

OK, I've given you a lot of data. Here are the points I want you to consider:

  • After being net short since time immemorial, the U.S. banks are now net long. Not only that, even after the initial 20% rally from The Bottom, they are still net long nearly the same amount and ratio of gold contracts that they were at The Bottom.
  • Since early December of last year, the 20 non-U.S. banks have only reduced their net short position by 7,983 contracts or about 18%. In fact, when measured as a ratio, the non-U.S. banks are "more short" than they were last December with a current net short ratio of 2.55:1 versus last December's 2.26:1.
  • Over the same time period, the 4 U.S. banks have schemed and converted a 106,393 contract net short position into a 44,906 net long position. Again, that's a total net change of 151,299 contracts or 470 metric tonnes of paper gold.
  • I guess, ultimately, the question is this:

    What do the U.S. banks, primarily JPMorgan, know about the future of gold prices?

    The non-U.S. banks have not materially changed their net short position and the Bank Participation Reports for silver don't show anything of these same changes. In fact, the bank positions in silver have only deteriorated and worsened over the past 4 months. Check this out:

    DEC 2012 BPR (survey date 12/4/12 with silver price at $32.98)

    U.S. Banks: Long 625. Short: 40,198. Net short = 39,573 (with an astonishing net short ratio of 64.3:1)

    Non U.S. Banks: Long 13,928. Short: 32,127. Net short = 18,199 (with a net short ratio of 2.31:1)

    MAY 2013 BPR (survey date 5/7/13 with silver price at $23.92)

    U.S. Banks: Long 5,148. Short 27,021. Net short = 21,873 (with a net short ratio of 5.25:1)

    Non U.S. Banks: Long 13,223. Short 24,851. Net short = 11,628 (with a net short ratio of 1.88:1)

    SEPT 2013 BPR (survey date 9/3/13 with silver price at $24.43)

    U.S. Banks: Long 1,644. Short 25,319. Net short = 23,675 (with a net short ratio of 15.4:1)

    Non U.S. Banks: Long 8,431, Short 27,418. Net short 18,987 (with a net short ratio of 3.25:1)

    So I'll repeat myself, at the risk of being rude:

    What do the U.S. banks, primarily JPMorgan, know about the future of gold prices?

    Contrary to expectations, since the advent of QE∞, the price of gold has fallen over 20% while the U.S. Federal Reserve has created over 720,000,000,000 new dollars. While virtually ignoring silver, the four largest U.S. banks have eliminated an enormous potential liability and positioned themselves to profit from rising prices after years of "managing the ascent".

    Again, I ask you:

    • What do the U.S. banks, primarily JPM (the most primary of all Primary Dealers), know about the future?
    • What does this tell you about the future direction of price?
    • How might this U.S. bank net long position impact December deliveries?
    • With a current net position exceeding 65,000 long contracts, do you expect JPM to realize a massive loss or a massive gain in the months ahead?
    • Are you selling here or buying?

    Prepare accordingly.

    TF

    About the Author

    Founder
    turd [at] tfmetalsreport [dot] com ()

      123 Comments

    ag1969
    Sep 12, 2013 - 8:06am

    First

    First Amendment

    Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

    Motley Fool
    Sep 12, 2013 - 8:11am

    New Fofoa post

    For those that are interested, fofoa has a new post up that puts forward a good hypothesis that explains the census data which shows 4500 tonnes net export of gold for the US from 1991-2012.

    https://fofoa.blogspot.com/2013/09/what-about-sprotts-4500-tonne-export-gap.html

    Pining, I assume you at least would be interested.

    pbfurn ag1969
    Sep 12, 2013 - 8:16am

    But Why

    is JPM still short silver?

    Mickey
    Sep 12, 2013 - 8:21am

    1350

    they did a good job of blowing thru 1350 here huh? Almost as if someone was listening to you and decided to make it happen overnight in a few ticks

    I would think that during this current hit would be a great time to load up on long options with a few months

    I plan on buying miners into Dec or Jan.

    wrote calls covered calls yesterday sensing something but I really thought that something would be tomorrow or monday ahead of fed meeting. was planning to do more call writing and put buying today--too late.

    Mickey
    Sep 12, 2013 - 8:23am

    commodities

    it appears that commodities in general did not take much of a hit here--maybe up--meaning this was an isolated hit which of course means......

    John Galt
    Sep 12, 2013 - 8:41am

    Important Question

    Will there be another hat eating if silver blows through $22.00?

    ;)

    I'm just messing with you, Turd. You know we love you.

    Fat Willie
    Sep 12, 2013 - 8:51am
    John Galt
    Sep 12, 2013 - 8:56am

    No but...

    As I've been telling subscribers for days, only a break and close below $22 would cause me to alter my current bullishness.

    engineering edge Motley Fool
    Sep 12, 2013 - 8:57am

    56 to 1 claims on COMEX Gold

    I know this is a little off of your post on the "missing" 4500 tons of Au....

    I am looking for some opinions on the possibility of the US Fed/Treasury tying the COMEX settlement of claims to the de-valuation of the USD, and the debt ceiling debates?

    By running a best line fit through the correlation of the Gold Spot price versus the debt limit, we see a $3000 USD spot price with the debt limit raised to $17.8 Trillion USD from $16.7 Trillion USD.

    At the ratio of 56:1 claims of Open/Interest vs Registered, a default is imminent.

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