Banks On The Run

55
Sun, Feb 8, 2015 - 10:22pm

The latest CFTC Bank Participation Report brings the usual horrors and it confirms our "inherently unfair" thesis. However, there's also a bigger picture that gold investors everywhere need to consider.

Before we begin, the usual background:

  • The CFTC's Bank Participation Report is issued monthly from a survey taken at the Comex close on the first Tuesday of every month. The report summarizes the combined positions of the four largest U.S. banks (primarily JPM, MorganStanley, Citi, Goldman but occasionally others) and the twenty largest non-U.S. banks (Scotia, HSBC, DeutscheBank, UBS, Barclays and others).
  • These reports might be utter nonsense and complete falsifications. Just last year, JPMorgan was fined by the CFTC for "repeatedly submitting inaccurate reports relating to the required reporting of positions". See here: https://www.cftc.gov/PressRoom/PressReleases/pr6968-14
  • I will leave it up to you, dear reader, to assign or withhold legitimacy to/from the data. My job is simply to report to you on what the data shows...and it's sickening.

    Ole Turd has written volumes over the past few weeks, describing the inherent unfairness of the Comex paper derivative market structure. (An example: https://www.tfmetalsreport.com/blog/6566/inherent-unfairness) Unlike other "markets", The Bullion Banks simply create new paper contracts whenever speculative demand increases. They do this to blunt momentum and stall price. Then, as price invariably retreats, The Banks use Spec liquidations to cover and withdraw these very same contracts.

    For example, during January's price rally of over $100, total Comex gold open interest rose from a low of 371,000 contracts to a high of 451,000. Now that price has fallen back $70, total Comex gold open interest has drawn back down to 403,000. Near round-trip in price, near round-trip in open interest, too. Neat trick, huh? It's good work if you can get it.

    We've documented this along the way by monitoring the daily open interest changes as well as the CFTC's weekly Commitment of Traders Report. Therefore, last Friday's Bank Participation Report was not surprising but it was grotesque, nonetheless.

    I'll save you the gory details this time of how the BPR has changed, month over month, for the past two years. I just wrote about this again last month and you can check it out here if you'd like: https://www.tfmetalsreport.com/blog/6520/how-they-did-it.

    Instead, this time I'd simply like to focus on how the 24 banks have changed their positions over the past month and the past year. It's pretty remarkable stuff.

    A little over a month ago and with price at $1219, the January BPR survey was taken. When the report was released three days later, it looked like this:

    GROSS LONG GROSS SHORT TOTAL

    U.S. Banks 11,728 37,321 -25,593

    Non U.S. Banks 32,985 80,227 -47,242

    TOTAL 44,713 117,548 -72,835

    What this shows is that, as of January 5 2015, the combined position of the 24 largest banks in the world that trade paper gold was 72,835 contracts NET SHORT. That's 7,283,500 ounces or about 226 metric tonnes. It's interesting to note, of course, that the entire Comex gold vaulting system only holds 8,166,900 troy ounces (registered and eligible) or about 254 metric tonnes.

    Over the next four weeks, price and open interest both rose and by the time this most recent BPR survey was taken last Tuesday, gold was up $41 to $1260 and total OI was up 25,000 to 419,524 contracts. The report, released late last Friday showed this:

    GROSS LONG GROSS SHORT TOTAL

    U.S. Banks 9,163 65,901 -56,738

    Non U.S. Banks 20,009 96,264 -76,255

    TOTAL 29,172 162,165 -132,993

    As you can see, as of last Tuesday the 24 largest gold banks were now NET SHORT 132,993 Comex gold contracts. That's the equivalent of 13,299,300 troy ounces of paper gold or about 414 metric tonnes.

    More startling and in confirmation of our "inherent unfairness" storyline, over the past four weeks:

  • Price rose by $41 or 3.37%
  • Total Comex gold open interest rose by 25,503 contracts or 6.46%
  • The total 24 bank NET SHORT position rose by 60,158 contracts or 82.6%
  • Oh my goodness. Just typing those numbers makes me want to vomit. And to think that there are still Cartel Shills and Apologists out there that claim that "the banks are just making a market" and/or "hedging for miners". If you believe that, I've got an Idaho potato farm to sell you.

    Anyway, draw you own conclusions. If you'd like to persist in a belief that these "markets" are "free and fair", knock yourself out. As we end this month's exercise though, I'd like you to consider the implications of one more BPR survey data table. First, check out the data, itself:

    GROSS LONG GROSS SHORT TOTAL

    U.S. Banks 68,658 24,937 +43,721

    Non U.S. Banks 18,752 48,860 -30,108

    TOTAL 87,410 73,797 +13,613

    So, now you're wondering...when was this survey taken? And at what price and open interest? Well, I hope you're sitting down. I also hope that you haven't recently eaten.

    The data listed above was from the BPR survey taken exactly one year ago, on February 4, 2014. Price that evening was $1252 and total open interest was 368,279.

    Therefore, with price nearly unchanged YoY and with total open interest up by about 51,000 contracts, the 24 largest gold-trading banks have massaged their NET position by 146,606 contracts. A NET change of 14,660,600 troy ounces or 456 metric tonnes....

    All.

    To.

    Keep.

    Price.

    Unchanged.

    And this is where I will leave you. Ponder that bit of information for a while. You might ask yourself..."Self, what in the world are The Banks so afraid of? Why would they go to such great lengths to keep price from rising? How is this even legal?"

    Those are certainly good questions to ask and I look forward to pondering the answers and addressing the implications in the days ahead.

    TF

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      55 Comments

      Refresh
    Goldencross
    Apr 13, 2015 - 1:24pm

    Inequality for all !

    Must Watch!

    Inequality for all !

    Former secretary of labor under president Clinton, Robert Reich about the economic inequality. After 1978 wages became stagnant, people in the workforce had to work harder to make a living. Earning les and les while the 1% wel to do people only went richer and richer!

    Please see this documentary its wel worth your time!

    https://www.youtube.com/watch?v=UxADtyzvjJk

    lakedweller2DeaconBenjamin
    Feb 9, 2015 - 2:33pm

    @deacon

    I wonder what the back up of oil tankers are around the US Ports since Woody claims there is an oil glut and prices need to fall...Just recently Gartman was saying buy tanker stocks because of the surplus in oil needing to be stored on tankers. Meanwhile the tanker stocks fall with oil prices.

    I guess I need to know more about boats and docks.

    DeaconBenjamin
    Feb 9, 2015 - 12:25pm

    Backlog of cargo ships could ease as longshoremen return to work

    The backlog of cargo ships in Puget Sound could ease as longshoremen go back to work.

    There are about 20 ships caught in the middle of a West Coast slowdown.

    When KIRO 7 talked to the group in charge of the terminals at the Port of Seattle, they said work is supposed to pick back up Monday morning, meaning several ships docked there can finally get moving again. Over the weekend, seven ships and their cargo sat stalled at the Port of Seattle as well as seven others at the Port of Tacoma.

    https://www.kirotv.com/news/news/backlog-cargo-ships-could-ease-longshor...

    DeaconBenjamin
    Feb 9, 2015 - 12:14pm

    Turkey, Russia’s Gazprom survey new pipeline route

    Energy Minister Taner Yıldız and Gazprom CEO Alexey Miller took off from Istanbul and flew along the Black Sea coast, continuing as far as Ipsala on the Turkish-Greek border, to evaluate the possible entry points of the proposed pipeline. The two officials made it back to Istanbul by using a route over the Marmara Sea coastline to finish the four-hour flight.

    Yıldız said a research committee would file a report on the first assessments of the pipeline soon, possibly by Feb. 10. The committee would consist of Gazprom members and Turkey’s Petroleum Pipeline Corporation, BOTAŞ. “With the four-hour aerial tour, we had an opportunity to see how we can begin such a project in Thrace and explore the pipeline route,” he said. “We passed over some places two to three times as we tried to assess how we can work with environmental concerns in some agricultural areas, forests and wet lands,” he added.

    Yıldız also said the negotiation process for the pipeline involved discussions over the price of natural gas from Russia for Turkey. “Turkey is sensitive about negotiations on the price of natural gas as much as it is about the realization of the Turkish Stream pipeline,” he said. Yıldız added they had held a third meeting with the Gazprom committee over the gas price. “We are expecting to reach an agreement by next week,” he revealed.

    Maros Sefkovic, vice president of the European Commission’s Energy Union, had previously remarked the Turkish Stream may create legal and economic problems. In response, Yıldız said there were always threats and opportunities when big projects were involved. “We have those experiences from the Trans-Anatolian Pipeline, the Baku-Tbilisi-Ceyhan Pipeline and the Kirkuk-Yumurtalık Pipeline. These issues are multilateral, so it is normal to face some problems,” he said. “The important thing is: if you have the will to overcome those problems. Turkey’s political will and stability is strong enough to solve those problems,” he added.

    https://www.hurriyetdailynews.com/turkey-russias-gazprom-survey-new-pipe...

    silverflower
    Feb 9, 2015 - 10:45am

    Merkel meets Obama today.

    Most important header in German news today. They are discussing the issue whether yes or no delivering weapons to Ukraine.

    All so laughable. Of course they will. Merkel is just a puppet for Woody. And Woody of course is a puppet of the US military industrial complex. They need to sell their weapons, of course they do. Business case for them.

    Question for Obama crew just is how to blame Putin for the failing peace talks or the failing cease fire of coming Wednesday. They will present us their answer shortly.

    Swineflogger
    Feb 9, 2015 - 10:18am

    @Beware of Greeks bearing gifts

    Metaphors are lovely. Maybe Turd is our Trojan Horse. Just sayin. . . .

    KansascrudeTF
    Feb 9, 2015 - 10:06am

    Turd can JB squeeze some generic movement nums from Sunshine

    We continue to be amazed at the number of Eagles and Maples sold however the generic silver ie rounds, bars, 90% sold remain a mystery. I emailed Sunshine trying to get some nums for SRSRocco on this but never even got a response. My guess is the number of oz. would further surprise us. I have bought all of these in the past few years while continuing to buy Eagles and Maples. Steve has also tried to get info from Apmex again crickets. Maybe JM can provide some info or at least enlighten us as why no one will spill the goods.

    Feb 9, 2015 - 9:50am

    This week's JMB specials

    10 oz Sunshine Silver Bars Just $0.79 Over Spot!

    This week we are featuring one of our best selling products, the 10 oz Sunshine Silver Bar, which is now available for just $0.79 over spot per ounce for any quantity. Produced by the reputable Sunshine Mint, each bar contains ten troy ounces of fine .999 silver and features the popular Sunshine Silver Eagle design. This special pricing will only be available for a limited time while supplies last, so be sure to act now and save!

    With its renowned design, the 10 oz Sunshine Silver Bar is shipped brand new in its plastic case and has been produced with security features intact. The mints anti-counterfeit enhancements boast Mintmark SI technology, meaning that every bar has an engraving that is only visible through a specially designed Sunshine Minting Decoder Lens.

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    Also on sale this week is the 2015 1 oz British Silver Britannia Coin, which is available for just .49 over spot for any quantity. Produced by the prestigious Royal Mint, these coins are the newest addition to the popular Silver Britannia series. Each coin contains 1 troy ounce of .999 pure silver and has a legal tender face value of £2 in the UK. These brand new coins ship in mint-sealed tubes of 25 or monster boxes of 500, and non-mint lot quantities will ship in individual plastic flips.

    JM Bullion offers free shipping on all orders which includes full tracking and insurance. Our pricing contains no hidden fees the prices you see is your delivered price . If you have any questions about our products or promotions, please give us a call at 800-276-6508 or use our contact page to reach us via live chat or email.

    Good luck investing, and we look forward to servicing all of your precious metals needs.

    Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

    Feb 9, 2015 - 9:50am

    Thanks, Doc

    Much appreciated. Have a great week!

    Feb 9, 2015 - 9:48am

    All the news that is fit to read

    And you can find it all right here, every morning and throughout the day. Its not just good metals analysis that brings me here and makes the subscription worthwhile. Craig, your site here probably saves me a couple of hours per day because I don't search out stories from other websites and read them. What a bargain at $10 per month. It's right here! I stay more productive with my teaching and don't miss a thing. Thanks everyone, for all the contributions of article links, opinions, theories, and stories from the real world!

    J

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