Banks Playing Same Old Game

77
Wed, Jun 7, 2017 - 9:30am

In what should come as no surprise to anyone around here, The Banks are once again creating as much paper metal as necessary to stall an advance in price. Already twice this year we've seen this happen in Comex Digital Silver and now The Banks are working their alchemic magic in Comex Digital Gold, too.

Frankly, I'm not even sure why I'm taking the time to write about this. You know the drill. You know how this works. And you know how this always ends:

  • The Banks issue paper shorts on metal they don't have nor do they intend to deliver.
  • The Specs buy the contracts for metal they have no intention of ever acquiring.
  • The Banks simply issue enough paper contracts to meet Spec demand.
  • Eventually, Spec demand is sated and price begins to fall.
  • As price falls, Specs sell and Banks cover...thereby closing back out all of the ill-gotten contracts.
  • And The Banks always win because they have infinitely deeper pockets than the Specs. The Banks can simply issue as many contracts as necessary to outlast the Specs.

So here are the dirty details...

At the conclusion of Comex trading last Tuesday, May 30, total Comex gold open interest stood at 434,246 contracts. This was down from 474,848 two days earlier as Specs rushed to close out Jun17 positions before that contract went "off the board" and into "delivery".

In the week since, price has rallied 2.5% from the May 30 close of $1266 to yesterday's $1297. Also over this past five days, total open interest in Comex gold has risen from that 434,246 to yesterday's total of 494,041. Yes, that's an increase of nearly 60,000 contracts or about 14%.

These 60,000 new contracts represent 6,000,000 ounces of "gold" but, of course, no metal ever moves or is put on deposit as "collateral". Instead, it's just the same old game. The Banks issue the paper and the Specs buy it. The Banks know they can simply wait out the Spec demand and their hands are never forced through true physical delivery. In 2016, The Banks waited and waited, issued and issued, until they had run total OI all the way up to a RECORD of 657,776 contracts on July 11. The subsequent late year price collapse then drove total OI all the way back down to 392,000 by early December as the Specs rushed to liquidate their longs. Do you have any doubt that The Banks will simply pull this same stunt in 2017 if they need to?

So...anyway...I guess the point of this is two-pronged:

  1. To alert you that The Banks are gladly playing their same old games in 2017. We've already seen two, full wash-and-rinse cycles in Comex Digital Silver. One will eventually be attempted in Comex Digital Gold, too.
  2. However, with total OI still over 160,000 contracts shy of the alltime high of 2016, there's no need to panic at this point and assume that some sort of "raid" is imminent. There's clearly A LOT of potential Spec buying that is still on the sidelines.

Today so far is playing out about as we projected in last evening's podcast...sort of a non-deal ahead of all the action tomorrow. We'll probably see some small moves up and down but prices will likely stay in this $1290-1295 and $17.55-17.65 range most of the day.

Again, tomorrow brings Draghi, the UK elections and Comey on Capitol Hill so it's going to be a volatile and interesting day. The primary focus of your attention should be on the all-important USDJPY. If it stays down and finishes the week substantially below its 200-day moving average, it should be set for more downside in the days ahead. As you know, this in turn spills over into HFT Spec buying of CDG which, in turn, leads to Spec buying of CDS. So, watch that USDJPY very closely the rest of this week.

One bit of news overnight that you need to see. We mentioned the Banco Popular story in yesterday's podcast and the actual "bail-in" and takeover stuff happened earlier today. The details have been written up and summarized by ZH so be sure to check these two links:

Have a great day and be sure to check back later for a full podcast summary.

TF

www.tfmetalsreport.com/subscribe

About the Author

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

  77 Comments

mavens
Jun 7, 2017 - 9:31am
Jun 7, 2017 - 9:48am

First time this week

No surprise we got one of these today after yesterday...

Ye Olde NYSE Pre-Open USDJPY Ramp:

Orange
Jun 7, 2017 - 9:50am

Turd

You are right, we all know this. Rather than letting your excellent post go to waste, perhaps consider making it public.

Even better, send it to the CFTC.

Orange
Jun 7, 2017 - 9:51am

I was thinking the same thing

I'll make it public later this morning...after A2A.

Re the CFTC...<laughs hysterically>

Jun 7, 2017 - 9:55am

Also as discussed in yesterday's podcast

That big, red, nasty candle rejection away from the 200-day in the HUI is underway today. In early trading, the HUI is already down nearly 4 points and back to near 200. Let's hope we see a recovery.

Angry Chef
Jun 7, 2017 - 10:06am

BLOCKBUSTER: HANNITY CONFIRMED THE MAIN CORE IS...

...REAL TONIGHT

Tonight, Sean Hannity had two investigators on who revealed that 47 hard drives were stolen from the FBI, and on those hard drives were 600 million documents on Americans who had been "unmasked" revealing all details of their lives so they could be rounded up and put in internment camps and/or killed. Hillary and Obama spearheaded the effort. If Hillary had scammed her way in, we'd be toast, Trump saved our lives.

Now there is going to be a lawsuit on behalf of the 20 million (plus) people who had been unmasked, Comey is going down, the NSA might get it's ass kicked and Hillary and Obama had better worry. NOW FOR A REPOST of what I said about this years ago! Call this site FOUR YEARS AHEAD!

https://82.221.129.208/baaasepagev3.html

Going to be an interesting day for Mr. Comey I'd say....

2c piece
Jun 7, 2017 - 10:15am

Where

Where is everybody?

WARNING

What follows is a quick cybercurrency comment. I am a very small holder.

As I see it the value of cybercurrency:

1. The ability to take wealth from one country to another without worrying about customs.

2. To be able to protect oneself from hyperinflation in your country. There is a storey making the rounds of a Venezuelan who was able to feed her family using bitcoin.

3. Use of cybercurrency for contracts without a middle man such as purchases without credit card fees and real estate purchases.

4 There are other potentials that I also don't fully understand such as robotics. (see Cliff High's recent round table on Silver Doctors).

5. The freedom from complete control by TPTB.

Now back to your regularly scheduled metals analysys.

P.S. Being the second poster shows that I am still very interested in silver.

matt_
Jun 7, 2017 - 10:38am

I'm long NUGT again

I probably should stop while I am ahead. If I keep posting my trades here, I'm going to end up looking like the fool that I am.

For what it is worth: I bought back the shares of NUGT that I sold yesterday afternoon. I purchased them for less than I sold them yesterday, and things still look somewhat bullish for NUGT. Fingers crossed. Not nearly as confident as I was 2 days ago, but most of the majors look bullish (except maybe for GG that looks like a good short candidate today).

lakedweller2
Jun 7, 2017 - 10:39am

Recent Investigations

Evidently recently mentioned investigations of the silver market supposedly by tbe CFTC and FBI mean nothing to JPM.

JQuest
Jun 7, 2017 - 10:41am

Senate Intelligence Committee hears testimonies

Live Now..

Senate Intelligence Committee hears testimonies from Director of National Intelligence Daniel R. Coats, acting FBI Director Andrew McCabe, NSA Director Admiral Michael Rogers and Deputy Attorney General Rod Rosenstein.

Daniel Coats, Andrew McCabe & More Testify Before The Senate Intelligence Committee | TIME
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

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 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

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

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

Recent Comments

by Gasivs Buttox, 11 min 26 sec ago
by Montross515, 1 hour 2 min ago
by Angry Chef, 1 hour 15 min ago
by SteveW, 1 hour 39 min ago

Forum Discussion

by NW VIEW, 2 hours 37 min ago
by Trail Trekker, 3 hours 15 min ago
by Trail Trekker, 3 hours 19 min ago
by NW VIEW, 3 hours 45 min ago
randomness