Assessing The Latest Bank Participation Report

Mon, Apr 7, 2014 - 11:19am

Late Friday, the latest edition of the CFTC-generated Bank Participation Report was released. What does it show? That we are nearly back to "business as usual".

Longtime Turdites will recall that it was in June of last year when we saw something unusual happen. After being NET SHORT since time immemorial, the 24 global banks surveyed for the Bank Participation Report were suddenly NET LONG. After reaching a peak of nearly 185,000 contracts NET SHORT on 10/2/12 at the price level of $1800, the 24 banks utilized the counter-intuitive, nine-month price smash that they instigated to cover all of them and more. As mentioned above, by the survey of 6/4/13, the banks were NET LONG over 4,500 contracts. Just after the price lows that occurred later in June, another BPR survey was taken on 7/2/13 and, by then, the 24 bank NET LONG position had grown to nearly 21,000 contracts.

The summary position then fluctuated over the next few months but remained positive, in the NET LONG category. It reached a peak with the survey dated 12/3/13, just days before the ultimate Double Bottom in price. The report that day looked like this:

(Remember: The "US Bank" category consists of the 4 largest US bank positions and is primarily JPMorgan. At any time, it will also include the considerably smaller positions of MorganStanley, Jeffries, Tungstenman, Merrill, Citi and others. The 20-bank "Non-US Bank" category includes the positions of The Scoshe, DoucheBank, UnlimitedBS, HSBC, Barclays et al.)


12/3/13 US Bank 71,897 14,489 +57,408

non-US Bank 25,508 39,547 -14,039

Total NET +43,369

As you know, price Double Bottomed in late December and immediately began to rally in January. What else happened in January? The 24 banks also began to move, most notably JPM, which dumped about 12,000 of their accumulated longs.


1/7/14 US Bank 59,291 20,032 +39,259

non-US Bank 26,128 32,492 -6,364

Total NET +32,895

By early February, price was $70 (6%) off of The Bottom. JPM was adding longs again but the non-US banks were selling and shorting like crazy, in an obvious attempt to contain price.


2/4/14 US Bank 68,658 24,937 +43,721

non-US Bank 18,752 48,860 -30,108

Total NET +13,613 (the lowest NET since 9/3/13)

What happened next? Price rallied all through February and, by the next BPR survey date, gold was sitting near $1340. What did the banks (including JPM) do during that month? They dumped and shorted of course as they tried to absorb every bid and keep a lid on price, hoping to keep it from breaking out and drawing in even more Spec money. As you can see below, all of this shorting and selling flipped the total position back to NET SHORT for the first time since May of 2013.


3/4/14 US Bank 56,272 30,669 +25,603

non-US Bank 17,526 54,385 -36,859

Total NET -11,256

And here's where it gets troubling and unfortunate. We know what happened over the past month:

  • Price rallied from 3/4 through 3/14, reaching a closing peak of $1382 on 3/14.
  • This was all due to Spec money rushing into the gold pit as total open interest rose over that time period from 393,266 to 427,119. The 24 banks "absorbed" as much of this buying as they could, no doubt expanding their NET SHORT position considerably over those 10 days.
  • In the time since, price was smashed over $100, closing at $1280 last Tuesday, the date this latest BPR was surveyed.
  • Open interest also declined as all of the hot, spec money was flushed back out and the April contract moved into expiration and delivery. By last Tuesday's survey date, total Comex gold open interest had fallen to a new, multi-year low of just 363,451.
  • Knowing all of this, I anticipated little overall change in the NET position of the 24 banks. With the near 10% drop in open interest month-to-month, I even thought that perhaps the banks would flip back to NET LONG. Boy, was I wrong.


    4/1/14 US Bank 52,070 37,505 +14,565

    non-US Bank 20,048 59,025 -38,977

    Total NET -24,412

    The Banks must have shorted like crazy during the 10 days of 3/4 - 3/14. As spec money poured into the gold pit, The Cartel Banks were there to swallow every bid as they desperately tried to contain price. Remember how they fought to keep gold below $1360 and the trendline connecting the bounceback highs of last May and August? Do you recall how they were nearly overrun the week of 3/10 as "Ukrainian Fears" swept the markets? By closing above $1380, gold looked certain to rush toward $1430 and a breakout which would have led it back to $1525. This could not be allowed and it was to be resisted at all costs!

    The Banks then caught a break as GOFO turned sharply positive on 3/17. They used this readily-leasable gold to raid price, often during low-volume, low-liquidity Globex hours. This turned the charts negative and flushed the late-coming spec momos back to the sidelines. Open interest fell dramatically as did price. The Banks should have moved back toward a NET FLAT position. Instead, they shorted and sold so heavily during that first 10-day period that, even though total open interest declined by nearly 15% into the end of the month (64,000 contracts!!), they still saw their NET SHORT position nearly double from 3/4/14 to 4/1/14.

    So there are two ways to look at this. I'll let you decide which is more likely:

    1. It's back to business as usual. The Banks will short when they have to and then attempt to buy them back in the same old wash, rinse and repeat cycle we've seen for years. From a peak of 185,000 contracts NET SHORT 18 months ago, a total NET SHORT position of 24,412 is not really significant and nothing to worry about.
    2. The Banks will try to aggressively raid price from here in an attempt to get back to NET LONG. They had to counter-intuitively crush price in 2013 to eliminate their NET SHORT position. One small bump UP in 2014 and they're already back to NET SHORT? They can't be happy but, again, compared to being NET SHORT 185,000 contracts or 18,500,000 ounces (575 metric tonnes!) of paper gold, they can't be too concerned yet, either.

    Either way, the one conclusion you can't help but draw is this:

    The Cartel Banks are NOT giving up. Even my much-ballyhooed JPM NET LONG position has been trimmed considerably, back to maybe 40,000 contracts. Roughly half of what it was at its peak last summer. The Banks have clearly demonstrated that they wish to remain in control of the gold market for as long as possible, suppressing and capping rallies for their Central Bank Masters. The move to NET LONG was NOT a precursor or sea change. The Banks simply inspired the counter-intuitive smash and then used the weakness to cover a bunch of shorts at a HUGE PROFIT. They now seem content to play the same dangerous game again, hoping to once more fleece the Spec sheep.

    And in the end, does this surprise anyone? After levering themselves up to astronomical and unsustainable levels in 2007, most of The Banks died an ugly and painful death. Their zombie-like remains continue to haunt the earth as their "leadership" and trading desks continue as if nothing has changed, building up new positions across the board to leveraged heights not seen even in 2007. The next stake through the heart of these zombies and vampires is coming. It may be from the final breakdown of fractional reserve bullion banking but it may just as well come from another direction. It doesn't really matter and The Bankers and their monkeys don't care, anyway. All they care about is pleasing their Central Bank Masters and fattening their bonus pools for as long as possible.

    Well, their day of reckoning is coming. That much is certain. In the meantime, I will continue to stack physical metal, fully aware of the overwhelming positive fundamentals that make today's paper price ridiculously cheap. Thank you, you godless, soulless and evil bankers for giving me this continued opportunity to prepare for what is most assuredly coming.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    Apr 7, 2014 - 11:21am

    I feel like I've made quite a

    I feel like I've made quite a few things "public" lately. Maybe too many.

    This could be another public article. I'll let you all decide if I should flip it public tomorrow. Feel free to tell me no. My first and only obligation is to you, my dear Vaulter. Given the cynicism, trolling and indifference out there, everyone else can go pound sand.

    Apr 7, 2014 - 11:21am

    1st! whoop whoop ... These

    1st! whoop whoop ... These are some UNBELIEVABLE prices to capitalize on!!! BTFD!!!

    Apr 7, 2014 - 11:23am

    Lately Turd, your analysis

    Lately Turd, your analysis and A2A's have been incredible ... Keep up the good work. I like how you make the threads public a few days after Vault members get access. In my view, the more people that know what is happening, especially now with things seemingly moving at a MUCH faster rate than anything previously, the better. Keep on, keepin' on my man and I wish you, and all fellow Turdites, the best!! - Friend

    Apr 7, 2014 - 11:25am
    Apr 7, 2014 - 11:26am

    The Russions are coming!

    Buy gold :D

    Also, I say if they don't pay they can go away. You are worth the subscription Mr. Ferguson.

    Apr 7, 2014 - 11:29am


    Until yesterday, there hasn't been a whole lot to say. But, the areas I was watching for the "trigger event" seem to be getting very hot (Kharkov, Donetsk, et al.). It's just a hunch, but I think we are seeing the beginnings of what Russia will use to "stabilize" east Ukraine and that this will build until the Russian army pushes in. My father-in-law (in Donetsk) confirmed the Ukrainian fighters patrolling the skies today but on-the-whole, things are quiet in the majority of the city. We haven't talked much with our friends there as my wife's mother is visiting and we've been out-and-about enjoying family time. She flies back tomorrow and I'm not exactly sure if she's going to find the Donetsk airport shut down or not. Heck, according to some, she's flying into a new, autonomous republic (lol). Anyway, I'm confident the crisis is entering a new phase...keep an eye out for news involving Donetsk, Kharkov, Odessa, Lugansk, Donbass. I'll pass on what I hear.

    Apr 7, 2014 - 11:34am

    This is getting to be ridiculous

    I've been trying to believe that these were all unrelated...and maybe they are. Gotta still stick with Sir William of Ockham.

    However, this is getting ridiculous...

    Apr 7, 2014 - 11:36am

    muchas gracias, SS

    Just as you've been predicting, events are beginning to move very quickly. Please keep up posted. And thanks for allerting me to this:

    I check it daily. The google map on today's post is quite instructive.

    Apr 7, 2014 - 11:40am

    Kharkiv live stream

    Not sure if it's LIVE or not but here you go:

    Apr 7, 2014 - 11:41am


    Having subscribed to at least a dozen folks who run finance blogs/ letters I can only share my opinion.....there have been times when I have thought, "why buy the cow when I get pretty much all the milk I want for free?" meaning, so much stuff gets published publicly, why am I paying this guy? Just my two cents.

    Apr 7, 2014 - 11:43am

    TPTB, negative GOFO and the price of gold

    In order to destroy the morale of PM longs, TPTB think they can manipulate the GOFO (make it negative) and then smash the POG. since some believe (me for example) there is an inverse correlation between GOFO and POG, TPTB hope this current price smash of gold will result in a loss of faith of the followers and some stackers will disgorge their hoard.

    Apr 7, 2014 - 11:46am

    Apr 7, 2014 - 11:47am


    That site really has been Johnny-on-the-spot with timely updates. It is a great source for compiled news items that are made available in English. However, I've noticed a distinct "slant" in their commentary--just keep using your grey matter ;-)

    Urban Roman
    Apr 7, 2014 - 11:47am

    Aaaand it's gone

    How dare you rise above 1300?

    Some dude named Yamashita just had several hundred tons to sell, and only wanted 1297, at this very minute.

    Apr 7, 2014 - 11:48am

    Yellen and Interest Rates

    There has been recent chatter that Yellen and the Fed are going to sacrifice the stock market for the Bond Market, i.e. the sell off in the stock market will flow into the Bond Market and support the dollar. This will be negative for just about everything including the PM market.

    If this happens TURD, do you think Gold and Silver will plummet and breakdown?


    Apr 7, 2014 - 11:50am

    The Banks Will Raid

    I believe the banks will continue to raid price from here and eventually get back to net long. They didn't get price to break below $1280, but that didn't mean they couldn't. There is a breaking point and I believe they have simply been testing it. Chinese buying has been supporting price, but even they know they can by more at $1050 than $1280. The banks will try to take it down again and they will likely be successful.

    Many of us have been waiting and almost longing for that final capitulation. It hasn't happened yet. This has been going on so long we are numb, but that is not the same as capitulation.

    Apr 7, 2014 - 11:52am

    Another Year

    Of capping & smashing.

    With unlimited fiat available and gold to rob in manipulated conflicts.

    Apr 7, 2014 - 11:53am

    Saving Grace is lack of Open Interest

    CME reducing margins is clearly a baiting mechanism to pull specs back in to allow the banks to smash further. As long as they stay out at the moment, price should stabilize and create a base.

    If they're somehow suppressed further via positive GOFO, then open interest will again soar as levels approach $1100-1200/oz again. This could then trigger another windfall.

    I dont see price increasing until a major macroeconomic event occurs where the price is, suddenly, reset overnight (China or Russia announcing gold-backed currencies or a gold-partitioned SDR). Can you get it cheaper? I bet...but can you predict the event? No chance.

    Apr 7, 2014 - 11:57am

    JPM commodity exit

    Any thoughts on JPM change in strategy if any on metals if they divest commodity business . They have been running against the other bullion banks but will they continue this or fall in line?

    TF Metals fan
    Apr 7, 2014 - 11:57am

    I have had enough down days......

    I was happy to see GOFO turn negative three days in a row. And now you break this news? Gheee.......when does the fat lady really start to sing?

    Apr 7, 2014 - 11:57am


    Sharing, giving, is a gift that keeps on giving Turd. Share the love brother !!!

    Apr 7, 2014 - 12:01pm

    About the USD

    Thanks Turd. Frustrating to read the conclusions of your excellent analysis - but - it is what it is. And, frankly we should not be surprised. This is a war - we are mere spectators on the sidelines. The almighty USD is at the centre of it all. The Dollar will be protected at all costs, until they can no longer do so.

    TF Metals fan
    Apr 7, 2014 - 12:04pm

    double posting...sorry

    double posting...sorry

    Apr 7, 2014 - 12:05pm

    I vote for public, TF

    This is outstanding analysis, and should be of interest to anyone in the PM space (at least, anyone not so enamored with their own ego they think they have all the answers). We get great value here, there is no reason not to advertise it publicly to draw in more potential Turdites.

    One of the great benefits of this community is the people here, sharing their knowledge and expertise- so the more we grow the community the better off (and ultimately smarter) we all will be. Go for it!

    Apr 7, 2014 - 12:15pm

    Dip in Russian foreign reserves in March

    April 7, 2014, 1:40 pm Russian foreign reserves have dipped, shows new statistics from the Russian Central bank on Monday. The volume of Russia’s foreign reserves as of April 1, 2014, stands at $486.131 billion against $493.326 billion on March 1 of this year. The reserves for March dropped $7.2 billion, or 1.5 per cent, the bank said on its website. In 2013, Russia’s international reserves dropped 5 per cent, while the historic maximum was reached at the beginning of August 2008 at $598 billion. The BRICS bloc of five hold total foreign-currency reserves of $4.4 trillion, $3 trillion of which are held by China alone. Meanwhile, Moscow is struggling with fleeing foreign capital in the wake of Western sanctions for its annexation of Crimea. According to Russia’s Deputy Economy Minister, Andrey Klepach, around $70 billion of foreign capital left the country in the first three months of this year.

    Apr 7, 2014 - 12:17pm


    I feel that there has been a good amount of knowledge made public. In order to draw more subscriptions, withholding from public consumption would now be more successful in signing new residents to Turdville.

    Carrot and stick, for lack of a better metaphor...

    Apr 7, 2014 - 12:20pm

    go public

    This post strikes me as a critical one. We have a battle between falling GOFO and increasing shorts. The other regulars & newbies need to know this. But I agree with others that you shouldn't make too much public--just enough to meet your own business objectives. Perhaps a pitch for membership is warranted to accompany each of these you take public.

    Apr 7, 2014 - 12:25pm

    Crimea cost Ukraine over $10 bn in lost natural resources

    KIEV: Ukraine's ecology and natural resources minister estimated on Monday that Kiev had lost natural resources and related assets worth 127 billion hryvnias ($10.8 bn) when Russia annexed the Crimea region. Ukraine has said it will file compensation claims with international courts over the annexation of Crimea, which Ukrainian Prime Minister Arseny Yatseniuk said could ultimately cost Kiev "hundreds of billions of dollars". Andriy Mokhnyk's spokesman said the minister had told a news conference Ukraine intended to go to court to recover the money Ukraine would lose through its natural resources assets, which included businesses, 198 fields and 380 prospective ones. "Ministry staff have assessed the market value of the resource base for Crimea. According to preliminary estimates, it was 127 billion hryvnias," he told a news conference. The region is home to offshore drilling firm Chernomorneftegaz (Chornomornaftohaz) and Russia has put Crimea's oil reserves at 47 million tonnes and gas at 165.3 billion cubic metres, RIA news agency said. Russia took over Crimea, home to Russia's Black Sea Fleet, shortly after Ukrainian protesters toppled pro-Moscow President Viktor Yanukovich in February. Moscow said it was protecting its compatriots there from nationalists from western Ukraine, but the country's new leaders accuse Russia of waging a political campaign against them, using trade and the economy as weapons.

    Apr 7, 2014 - 12:29pm

    How does GOFO and BPR intereact?

    I mean how can you naked short with out the ability to pull gold from somewhere? Maybe I am totally missing the picture. Does a net short position cause negative GOFO? Why is the link (if any) between negative GOFO and net short possiton of the banks?

    Sooooo many questions.

    Apr 7, 2014 - 12:38pm

    anyone seeing a big intervention today?

    Nasdaq was plunging, miners were soaring. They had to stop this. they just did need some algos running...


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