Futures Market Fraud

Fri, Oct 30, 2015 - 11:56am

As we begin another Spec rinse cycle on The Comex, we thought it best to remind everyone once again of the fraudulent nature of the short selling that takes place there.

The central component of any futures market is the physical asset that backs the exchange. Though we can't be certain of exactly how much gold is in the Comex vaults (recall the disclaimer added in June of 2013: https://truthingold.blogspot.com/2013/06/the-comex-confirms-that-its-gol...), we can be certain that it is nowhere near the amount needed to settle the thousands of paper claims written against it.

And it is the unlimited ability of the "market-making" Bullion Banks to create these paper claims that lies at the heart of the matter.

Your latest example of Bullion Bank price manipulation and suppression through the use of this unlimited leverage has occurred this month. First, let's look at the CME Gold Stocks data as supplied by the CME Group. Note that the two reports below are dated October 1 and October 28:

The most important item to note: On October 1, the total amount of gold shown to be in the Comex vaults was 6,850,580 troy ounces. As of October 28, this amount had fallen to 6,700,799 troy ounces for a total decline of 149,781 ounces.

In a fair market, this decline in the total amount of the asset backing the paper contracts would force an equivalent decline in the number of contracts available on the exchange. Let's assume two things for the sake of creating a more fair futures market:

  1. That all gold MUST be readily deliverable. No more of this registered/eligible nonsense.
  2. Of course, not every contract holder will demand delivery but this does NOT grant the "market makers" the ability to create infinite amounts of derivatives, either. So, let's set a fair leverage and multiplier at 5X. This means that, for every physical ounce backing the exchange and shown in their vault, a Bullion Bank can create five "paper" ounces of derivatives.

Under this formula, and assuming that all 6.7MM ounces of gold currently shown in the Comex vaults is for sale/delivery, this sets the maximum number of contracts available at 335,000.

6,700,000 X 5 = 33,500,000

33,500,000 divided by 100/oz per paper contract = 335,000 contracts

Without the Bullion Banks having the unlimited, infinite ability of creating new contracts each day, the price of gold would have to rise and fall to reach an equilibrium where equal amounts of buyers and sellers exist...much like how the market for individual equities operates (https://www.tfmetalsreport.com/blog/7214/inherent-unfairness-comex).

In this "fair" system, the only way that The Bullion Banks (market makers) would be allowed to create new contracts was IF they deposited more metal (collateral) for potential delivery. If JPMorgan wanted to issue 1,000 new Dec15 contracts to meet demand, they would first have to deposit an additional 20,000 ounces of readily-deliverable gold.

20,000 ounces with 5X leverage = 100,000 ounces of paper

100,000 ounces of paper at 100/ounces per contract = 1,000 contracts


As noted above, between Oct 1 and Oct 28, the total amount of gold shown to be held in the Comex vaults FELL by 150,000 ounces. Theoretically, this should have restricted The Banks' ability to create new leverage. Instead, this decline in the amount of collateral backing the exchange didn't matter at all!

Again, using the data generated by the CME itself, we can go back and review the total amount of contracts (open interest) on the Comex exchange over the same time period.

October 1 total Comex gold open interest: 419,016 contracts

October 28 total Comex gold open interest: 470,525 contracts

This means that while available gold (collateral) was declining by 150,000 ounces, The Bullion Banks were free to create over 5,100,000 new ounces of "paper gold".

470,525 - 419,016 = 51,509 contracts

51,509 contracts X 100 ounces/contract = 5,150,900 ounces of paper gold

AND THIS IS THE INHERENT UNFAIRNESS OF THE COMEX PAPER DERIVATIVE PRICING SCHEME. In fact, it's hard to understand how this doesn't constitute criminal fraud. Why? Let's look at the definition of "fraud": https://legal-dictionary.thefreedictionary.com/fraud

Fraud must be proved by showing that the defendant's actions involved five separate elements: (1) a false statement of a material fact,(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result.

So, let's see....

  1. "A false statement of material fact." Is it a "material fact" that The Banks have an unlimited ability to leverage the available gold collateral that backs the exchange? Was the CME Group attempting to protect themselves in this point by adding the Gold Stocks disclaimer in 2013?
  2. "Knowledge on the part of the defendant that the statement is untrue". In this instance, the "statement" in question is the implied representation of physical gold behind each contract. The infinite creation of paper contracts would certainly seem to fit this part of the definition.
  3. "Intent of the part of the defendant to deceive the alleged victim". Without question, this is the case. The Banks deceive investors and traders through the creation of paper contracts that have no physical asset backing.
  4. "Justifiable reliance by the alleged victim on the statement". This one's a little fuzzy. Can it be "proven" that all of the momentum-chasing Spec trading funds only trade paper contracts based upon their "reliance" that the exchange operates freely and fairly?
  5. "Injury to the alleged victim as result". Well, this one's easy. Continuing below...

The "injury" is financial and we are once again watching it play out in real time. After the FOMC statement of September 17, sentiment in the gold "market" began to turn from bearish. After the September NFP employment report of October 2, sentiment got downright bullish. Over the course of the next 3.5 weeks, the paper price of gold rallied from an October 1 close of $1114, to an intraday high if $1192 on October 15 and a Comex close on October 28 of $1176.

As noted above, over this same time period, The Bullion Banks created over 5.1MM new ounces of paper gold in order to meet the demand coming from the now-bullish trading and managed money funds as well as individual investors. Without this unbacked (fraudulent?) new supply of paper, how much higher would have prices risen? We'll never know but it's certainly fair to say that prices would have peaked much higher than just $1192. These are gains that the speculators were never allowed to realize, thus, the alleged victims were in fact "injured" as a result.

So, there you have it. Does this meet the criminal definition of "FRAUD"?

Finally, conspiracy to commit fraud often also includes a plan/intent by the perpetrator to cover up their crime and it appears that we are seeing that once again this week.

On Wednesday, the latest FOMC statement was issued after the Comex had closed for the day. The low-volume selling that occurred on the Globex after-hours exchange drove the price of gold down over $20. By the time the Comex re-opened on Thursday, Spec stop-loss orders were immediately triggered. This drove prices down even further and the Spec selling allowed The Banks the ability to buy back and close some of the very same Comex contracts that they had deceitfully issued in the previous weeks. In fact, the final open interest data for Thursday shows that, while prices fell $29 from Wednesday's close, total open interest also fell by over 12,000 to 458,800 contracts.

In summary, do you now see how this works? The Bullion Banks issue paper contracts backed with gold that they do not have. In doing so, they cap price and stall momentum until a news item comes along that sends price lower. As speculators flee back out of the "market", The Banks use this selling to buy back the ill-gotten paper contracts that they should never have been allowed to create in the first place.

The only remaining question is: Does this constitute criminal fraud? Perhaps an industrious young prosecutor at the Lower Manhattan branch of the U.S. Attorney's Office would be willing to take a look? Instead of a civil case involving the difficult-to-prove notion of "market manipulation", maybe a criminal case using the CME's own easily-verifiable and public statistics would be possible? I don't know but it's worth a shot.

In the meantime, as in the movie "War Games", the only winning move is not to play at the Comex "casino". Anyone crazy enough to wander into this Den of Vipers (https://www.tfmetalsreport.com/blog/7110/den-vipers) will soon prove again the old idiom regarding "a fool and his money". Your best option remains the consistent stockpiling of physical metal, fully allocated and outside of the Comex and Bullion Banking system, as you await the day this fractional reserve derivative pricing scheme finally collapses.


About the Author

turd [at] tfmetalsreport [dot] com ()


Oct 30, 2015 - 12:49pm



Oct 30, 2015 - 12:50pm


1st! now to read.

Oct 30, 2015 - 12:54pm

Top 5


Oct 30, 2015 - 12:59pm

Where is Marchas?

So on Wednesday morning my wife and I were driving to a nearby town to work on our rural place, and I am closely watching DUST on my phone. My plan was to stay in until the AU price had retraced back down to 1120-ish.
I told me wife, "We have a 15% gain."
She said, "You better put on a stop to lock most of that in."
I had to agree. So I put in a stop loss order a buck below the present price.
A few minutes later I said "We have a 20% gain.
She replied, "Why don't you move your stop loss up." I moved it up to .75 below the current price
Very practical that woman is.
Then we went into a canyon and lost reception. When we came out we stopped for lunch and I fired up the laptop. I had been stopped out on a 78 cent pullback. So I looked the other way and we worked on installing rain gutters and feeding them into a collection tank at our place the rest of hte day. Looking at charts Wednesday evening made me really wish I had put that stop loss on about .04 lower. I got stooped out by three lousy cents. It cost me dearly in light of Thursday's action. But there are no regrets. How can you know what price it will pull back to?
We had a nice gain. My wife patted me on the back. I patted myself on the back.
Looking for a bullish entry point now. We'll get back into SGDM, and perhaps a bit of NUGT, when the leghounds are done.

By the way, it is better to buy put options on your favorite instrument when we expect a smash. As price falls, the implied volatility increases, making the price of puts go higher. If the fund manager (direxion) is skimming, causing the price to fall incrementally, the puts also gain by this action. The only downside I see is the "time decay" effect lowering your price as the days pass, so you don't want to stay in too long.

I wish my retirement plan would let me trade options.

Oct 30, 2015 - 1:08pm
Oct 30, 2015 - 1:11pm

Obama's Resume

1. First President to be photographed smoking a joint.

2. First President to apply for college aid as a foreign student, then deny he was a foreigner.

3. First President to have a social security number from a state he has never lived in.

4. First President to preside over a cut to the credit-rating of the United States.

5. First President to violate the War Powers Act.

6. First President to be held in contempt of court for illegally obstructing oil drilling in the Gulf of Mexico.

7. First President to require all Americans to purchase a product from a third party.

8. First President to spend a trillion dollars on "shovel-ready" jobs when there was no such thing as "shovel-ready" jobs.

9. First President to abrogate bankruptcy law to turn over control of companies to his union supporters.

10. First President to by-pass Congress and implement the Dream Act through executive fiat.

11. First President to order a secret amnesty program that stopped the deportation of illegal immigrants across the U.S., including those with criminal convictions.

12. First President to demand a company hand-over $20 billion to one of his political appointees.

13. First President to tell a CEO of a major corporation (Chrysler) to resign.

14. First President to terminate America’s ability to put a man in space.

15. First President to cancel the National Day of Prayer and to say that America is no longer a Christian nation.

16. First President to have a law signed by an auto-pen without being present.

17. First President to arbitrarily declare an existing law unconstitutional and refuse to enforce it.

18. First President to threaten insurance companies if they publicly spoke out on the reasons for their rate increases.

19. First President to tell a major manufacturing company in which state it is allowed to locate a factory.

20. First President to file lawsuits against the states he swore an oath to protect (AZ, WI, OH, IN).

21. First President to withdraw an existing coal permit that had been properly issued years ago.

22. First President to actively try to bankrupt an American industry (coal).

23. First President to fire an inspector general of AmeriCorps for catching one of his friends in a corruption case.

24. First President to appoint 45 czars to replace elected officials in his office.

25. First President to surround himself with radical left wing anarchists.

26. First President to golf more than 150 separate times in his five years in office.

27. First President to hide his birth, medical, educational and travel records.

28. First President to win a Nobel Peace Prize for doing NOTHING to earn it.

29. First President to go on multiple "global apology tours" and concurrent "insult our friends" tours.

30. First President to go on over 17 lavish vacations, in addition to date nights and Wednesday evening White House parties for his friends paid for by the taxpayers.

31. First President to have personal servants (taxpayer funded) for his wife.

32. First President to keep a dog trainer on retainer for $102,000 a year at taxpayer expense.

33. First President to fly in a personal trainer from Chicago at least once a week at taxpayer expense.

34. First President to repeat the Quran and tell us the early morning call of the Azan (Islamic call to worship) is the most beautiful sound on earth.

35. First President to side with a foreign nation over one of the American 50 states (Mexico vs Arizona).

36. First President to tell the military men and women that they should pay for their own private insurance because they "volunteered to go to war and knew the consequences."

37. Then he was the First President to tell the members of the military that THEY were UNPATRIOTIC for balking at the last suggestion.

Oct 30, 2015 - 1:14pm


it's criminal fraud! But just like the fall of the USSR, when all the Oligarchs stole everything the could before it completely crashed, so to in the USSA. The Elites are stealing everything not nailed down, right in front of our eyes!

Oct 30, 2015 - 1:21pm

USSA elite theft


Then we should expect a forced confiscation of gold, and the outlawing of gold ownership in the US after the crash, collapse, reset. No doubt, they'll offer a cool $1K per ounce, the set the price of internationally traded gold 20x higher after we have forked it over.

The house never loses.

Where can a little person invest to protect?

Oct 30, 2015 - 1:24pm


Make all participants in the Comex codefendants in the fraud against the general public buying stocks and physical in reliance that the Comex is legitimate. Join as codefs the brokerage firms and others participating in those Markets (such as the exchanges and dealers) and make the claim they have a fiduciary duty to disclose the fraud to those that are buying associated products but not directly participating in tbe Comex. This could extend to the US Gov and regulators as the wicket gets stickier. The real success would be to join as CoDs specific named individuals.

If only the US had statutes and laws! Music to Camelot fades in at this point.

(Always deal with codefendants rather than conspiracies. Fewer elements of proof)

Oct 30, 2015 - 1:39pm

Gold Confiscation

Not sure that they will come after 0.001% of the population that holds PM's. But there is that nasty little thing called the 2nd Amendment, currently keeping them at bay. NSA knows all of our electronic transactions, pay cash or store abroad.

Subscribe or login to read all comments.


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 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Key Economic Events Week of 8/5

8/5 9:45 ET Markit services PMI
8/5 10:00 ET ISM services PMI
8/6 10:00 ET Job Openings
8/8 10:00 ET Wholesale Inventories
8/9 8:30 ET Producer Price Index

Key Economic Events Week of 7/29

7/30 8:30 ET Personal Inc/Spending & Core Inflation
7/30 10:00 ET Consumer Confidence
7/31 8:15 ET ADP employment
7/31 2:00 pm ET FOMC Fedlines
7/31 2:30 pm ET CGP presser
8/1 9:45 ET Markit Manu PMI
8/1 10:00 ET ISM Manu PMI
8/2 8:30 ET BLSBS
8/2 10:00 ET Factory Orders

Key Economic Events Week of 7/22

7/23 10:00 ET Existing home sales
7/23 10:00 ET Richmond Fed Manu Idx
7/24 9:45 ET flash Markit PMIs
7/25 8:00 ET Count Draghi/ECB policy meeting
7/25 8:30 ET Durable Goods
7/25 8:30 ET Wholesale Inventories
7/26 8:30 ET Q2 GDP first guess

Key Economic Events Week of 7/15

7/15 8:30 ET Empire State Fed Index
7/16 8:30 ET Retail Sales and Import Price Index
7/16 9:15 ET Cap Ute and Ind Prod
7/16 10:00 ET Business Inventories
7/17 8:30 ET Housing Starts and Building Permits
7/18 8:30 ET Philly Fed
7/19 10:00 ET Consumer Sentiment

Key Economic Events Week of 7/8

7/9 8:45 ET Fed Stress Conference, three Goon speeches
7/10 8:30 ET CGP Hump-Hawk prepared remarks
7/10 10:00 ET CGP Hump-Hawk House
7/10 10:00 ET Wholesale Inventories
7/10 2:00 ET June FOMC minutes
7/11 8:30 ET CPI
7/11 10:00 ET CGP Hump-Hawk Senate
7/11 12:30 ET Goon Williams
7/12 8:30 ET PPI

Key Economic Events Week of 7/1

7/1 9:45 ET Markit Manu PMI
7/1 10:00 ET ISM Manu PMI
7/1 10:00 ET Construction Spending
7/2 6:35 ET Goon Williams
7/3 8:15 ET ADP June employment
7/3 8:30 ET Trade Deficit
7/3 9:45 ET Markit Services PMI
7/3 10:00 ET ISM Services PMI
7/3 10:00 ET Factory Orders
7/4 US Market Holiday
7/5 8:30 ET BLSBS

Key Economic Events Week of 6/24

6/25 10:00 ET New Home Sales
6/25 1:00 pm ET Chief Goon Powell
6/25 5:30 pm ET Goon Bullard
6/26 8:30 ET Durable Goods
6/27 8:30 ET Q1 GDP final guess
6/28 8:30 ET Personal Income and Consumer Spending
6/28 8:30 ET Core Inflation
6/28 9:45 ET Chicago PMI

Key Economic Events Week of 6/17

6/18 8:30 ET Housing Starts and Building Permits
6/19 2:00 ET FOMC Fedlines
6/19 2:30 ET CGP presser
6/20 8:30 ET Philly Fed
6/21 9:45 ET Markit flash June PMIs

Key Economic Events Week of 6/10

6/11 8:30 ET Producer Price Index
6/12 8:30 ET Consumer Price Index
6/13 8:30 ET Import Price Index
6/14 8:30 ET Retail Sales
6/14 9:15 ET Cap Ute and Ind Prod
6/14 10:00 ET Business Inventories

Forum Discussion

by sierra skier, Aug 17, 2019 - 7:14pm
by sierra skier, Aug 17, 2019 - 8:30am
by Boggs, Aug 16, 2019 - 7:46pm
by Boggs, Aug 16, 2019 - 7:07pm