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

    About the Author

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

      55 Comments

    Pug Nuggets
    Feb 8, 2015 - 10:26pm

    First!

    I love competition.

    What If
    Feb 8, 2015 - 10:30pm

    Keep staking

    Keep staking

    AIJ
    Feb 8, 2015 - 10:57pm

    Beware of Greeks bearing gifts

    ...the gift that keeps on giving

    tyberious
    Feb 8, 2015 - 11:22pm

    Its

    probably worse for Silver!

    Keep Stacking!

    Gamble
    Feb 8, 2015 - 11:22pm

    Same ol same ol

    Nothing changes ! What can we expect hmmmm "more pain"

    gamble gamble

    Fred Hayek
    Feb 8, 2015 - 11:39pm

    Oh, hell, someone will have to

    Citibank and JP Mor-gan were shorting every-one

    Wings - Band On The Run (Original Video)
    Safety Dan
    Feb 8, 2015 - 11:43pm

    Rate “Sensitive” assets have

    Rate “Sensitive” assets have rough week, these break support

    02/07/2015 at 7:10 am, filed under Govt. bonds, real estate, TLT, Utilities; No Comments.

    CLICK ON CHART TO ENLARGE

    Interest rate sensitive assets like Government bonds (TLT), Real Estate (IYR) and Utilities (XLU) have benefit greatly from falling rates and the macro theme of deflation, pushing all of them much higher over the past year(s).

    Over the past year, each of these has gained 25% to 50% more than the S&P 500. The above chart reflects the strong rally in Utilities the past few years and how it remains inside of a well defined rising channel.

    XLU of late has been creating bearish wicks at the top if this channel at (1). This past week, XLU broke short-term support at (2). The lower right chart is of TLT, which reflects that a bearish rising wedge looks to have formed and the support of this pattern was taken out this week, as TLT in one week wiped out a months worth of gains.

    One month ago the Power of the Pattern shared "10 Reasons Why Interest Rates Are About to Reverse" (See post here)

    A decline in these rate sensitive assets and a rise in yields this week does NOT prove a new trend is at hand. Trend changes take time and what took place this past week at resistance could become very important in the weeks ahead if weakness in this complex continues.

    ReachWest
    Feb 8, 2015 - 11:51pm

    Incredible - Pivot Point Approaching.

    Those are pretty incredible numbers!

    A 456 Tonne change year over year to hold price in check. And - a current net short position of 226 Tonnes. As Turd asks, "What are they afraid of?" Hmm - I wonder.

    Now, understanding that this is all made up fake gold and that there are approx 50 to 100 owners for each ounce of paper gold - I have to ask the question: What happens if the demand for real Gold finally takes off overnight (perhaps due to a geopolitical issue - hmm, don't know, but there might be a few of those out there..) Anyway - what happens if these banks can no longer play the game? How would they cover? At what price could they cover?

    Very interesting times. Very interesting corner the entire god-forsaken financial system has painted itself into. I've been watching this for some time and have for a long while thought the jig would soon be up .. obviously wrong up to this point .. but do feel we are drawing very close to the pivot point.

    Thanks for the great explanation Turd. Most appreciated.

    ReachWest
    Feb 8, 2015 - 11:53pm

    Incredible - Pivot Point Approaching.

    Darn - Another duplicate - for fun I've overwritten the original and left the dup.

    Safety Dan
    Feb 8, 2015 - 11:53pm

    Sovereign debt scares– is the

    Sovereign debt scares– is the U.S. immune?

    12 Replies

    Many people are finally coming to a realization that should have been evident long ago: Greece’s debts are not going to be repaid. And as discussion turns to who might be next, it seems a good time to revisit the question of whether the United States could some day find itself in similar trouble. I am substantially more optimistic about this than I was a couple of years ago, and here is why.
    Continue reading →

    Let me begin by clarifying that the difference is not, as many other observers have often asserted, the fact that the U.S. debt is denominated in our own currency and therefore could always be repaid just by printing a sufficient quantity of dollars. Reinhart and Rogoff (2009, pages 111-116) documented more than 70 separate historical instances of overt default on domestic public debt. Jesse Schreger, a promising Ph.D. candidate from Harvard, has nicely laid out the theory for why that is. Overt defaults on government debt are costly, but so can inflation be if the government takes the alternative route of trying to monetize the debt. Which course a government takes– outright default or big inflation– will depend on the relative costs of those two options. Schreger does a nice job of demonstrating that a rational assessment of these alternative risks gets priced into the market valuations of sovereign debt around the world.

    This entry was posted on February 8, 2015 by James_Hamilton.

    Paul Mathis : H.L. Mencken said:

    “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”

    Key Economic Events Week of 11/18

    11/19 8:30 ET Housing Starts & Bldg Perms
    11/20 2:00 ET October FOMC minutes
    11/21 8:30 ET Philly Fed
    11/21 10:00 ET Existing Home Sales
    11/22 9:45 ET Markit November Flash PMIs

    Subscribe or login to read all comments.

    Contribute

    Donate Shop

    Get Your Subscriber Benefits

    Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

    Key Economic Events Week of 11/18

    11/19 8:30 ET Housing Starts & Bldg Perms
    11/20 2:00 ET October FOMC minutes
    11/21 8:30 ET Philly Fed
    11/21 10:00 ET Existing Home Sales
    11/22 9:45 ET Markit November Flash PMIs

    Key Economic Events Week of 11/11

    11/12 Three Fed Goon speeches
    11/13 8:30 ET CPI
    11/13 11:00 ET CGP on Capitol Hill
    11/14 8:30 ET PPI
    11/14 Four Fed Goon speeches
    11/14 10:00 ET CGP on Capitol Hill
    11/15 8:30 ET Retail Sales
    11/15 8:30 ET Empire State Manu Index
    11/15 9:15 ET Cap Ute and Ind Prod
    11/15 10:00 ET Business Inventories

    Key Economic Events Week of 11/4

    11/4 10:00 ET Factory Orders
    11/5 9:45 ET Markit Services PMI
    11/5 10:00 ET ISM Services PMI
    11/6 8:30 ET Productivity & Labor Costs
    11/6 Speeches by Goons Williams, Harker and Evans
    11/8 10:00 ET Consumer Sentiment
    11/8 10:00 ET Wholesale Inventories

    Key Economic Events Week of 10/28

    10/30 8:30 ET Q3 GDP first guess
    10/30 2:00 ET FOMC fedlines
    10/30 2:30 ET CGP presser
    10/31 8:30 ET Personal Income & Spending
    10/31 8:30 ET Core Inflation
    10/31 9:45 ET Chicago PMI
    11/1 8:30 ET BLSBS
    11/1 9:45 ET Markit Manu PMI
    1/1 10:00 ET ISM Manu PMI

    Key Economic Events Week of 10/21

    10/22 10:00 ET Existing home sales
    10/24 8:30 ET Durable Goods
    10/24 9:45 ET Markit flash PMIs
    10/24 10:00 ET New home sales
    10/25 10:00 ET Consumer Sentiment

    Key Economic Events Week of 10/14

    10/15 8:30 ET Empire State Fed MI
    10/16 8:30 ET Retail Sales
    10/16 10:00 ET Business Inventories
    10/17 8:30 ET Housing Starts and Bldg Perms
    10/17 8:30 ET Philly Fed MI
    10/17 9:15 ET Cap Ute and Ind Prod
    10/18 10:00 ET LEIII
    10/18 Speeches from Goons Kaplan, George and Chlamydia

    Key Economic Events Week of 10/7

    10/8 8:30 ET Producer Price Index
    10/9 10:00 ET Job Openings
    10/9 10:00 ET Wholesale Inventories
    10/9 2:00 ET September FOMC minutes
    10/10 8:30 ET Consumer Price Index
    10/11 10:00 ET Consumer Sentiment

    Key Economic Events Week of 9/30

    9/30 9:45 ET Chicago PMI
    10/1 9:45 ET Markit Manu PMI
    10/1 10:00 ET ISM Manu PMI
    10/1 10:00 ET Construction Spending
    10/2 China Golden Week Begins
    10/2 8:15 ET ADP jobs report
    10/3 9:45 ET Markit Service PMI
    10/3 10:00 ET ISM Service PMI
    10/3 10:00 ET Factory Orders
    10/4 8:30 ET BLSBS
    10/4 8:30 ET US Trade Deficit

    Key Economic Events Week of 9/23

    9/23 9:45 ET Markit flash PMIs
    9/24 10:00 ET Consumer Confidence
    9/26 8:30 ET Q2 GDP third guess
    9/27 8:30 ET Durable Goods
    9/27 8:30 ET Pers Inc and Cons Spend
    9/27 8:30 ET Core Inflation

    Key Economic Events Week of 9/16

    9/17 9:15 ET Cap Ute & Ind Prod
    9/18 8:30 ET Housing Starts & Bldg Perm.
    9/18 2:00 ET Fedlines
    9/18 2:30 ET CGP presser
    9/19 8:30 ET Philly Fed
    9/19 10:00 ET Existing Home Sales

    Recent Comments

    Forum Discussion

    by Green Lantern, 3 hours 34 min ago
    by zman, 4 hours 51 min ago
    by NW VIEW, 8 hours 37 min ago
    by CongAu, 9 hours 2 min ago