Same As It Ever Was

While we've all noticed some of the extreme and historic changes to the Commitment of Traders report over the past two months, the once/month Bank Participation Report belies the fact that nothing has yet changed. Whenever price rallies, The Banks are still quick to take the short side of the trade.

First, we should probably begin this post with the usual background and disclaimer:

We've written about these CFTC-generated reports so many times, it would be impossible to link every post. However, nearly every post began with these bullet points. Here they are again, just so that we're on the same page:

  • 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).
  • Always keep in mind that these reports might be utter nonsense and complete falsifications, designed to mislead you and get you leaning the wrong way. In 2014, JPMorgan was fined by the CFTC for "repeatedly submitting inaccurate reports relating to the required reporting of positions". See here: http://www.cftc.gov/PressRoom/PressReleases/pr6968-14

Again, we know that what The Banks report as their "positions" provides an incomplete picture at best. Not only do The Banks maintain considerable long and short bets in the OTC market, they also operate numerous, offshore hedge funds and utilize these funds to take positions not included in the CFTC data as "commercial". So, what good are these reports? Similar to the weekly Commitment of Traders reports, the Bank Participation Report is only useful/interesting when considered historically...and that's what we'll do again today.

OK, with that said, let's take a look at the latest report that was surveyed on Tuesday, August 1 and released late last Friday, August 4.

If you've followed along for any length of time, then you know how The Banks make a market on the Comex. Once upon a time, The Banks operated as agents for the miners. The mining companies would hedge and/or sell forward their future production and would do so by having the agent Banks issue contracts on the Comex. The miner, through The Bank, would be on the short side of the trade and a speculator would bet on the long side. This is largely how the commodity markets functioned since they were first created.

However, over the past two decades, the amount of mining company hedging has declined to nearly zero. The most recent estimate we've seen showed only a total of about 270 mts of production in 2016 (http://www.reuters.com/article/us-gold-hedging-idUSKCN0ZS02B). Even if ALL of this hedging occurred on the Comex, this would only represent a need for about 87,000 contracts of open interest. However, we all know that total Comex gold open interest routinely averages in the 450,000-500,000 contract range. Thus the difference between 87,000 and current open interest is simple Bank speculation.

Again, we can't attribute EVERYTHING to the Comex and surely some of the stated Bank Comex positions are offset with other positions in London and on the opaque OTC "markets". However, when we consider the history of the Bank Participation Report data, a clear trend emerges and its one that, unfortunately, is quite clearly still present today.

I suppose that the best ting we can do is give you the data. In doing so, you should be quickly able to discern for yourself how this works:

1/5/16   @$1078                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                 6,387                                  49,447                                  -43,060

Non-US Banks                                      35,499                                 37,698                                    -2,199

TOTAL                                                                                                                                                -45,259

2/2/16    @$1127                         GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                  9,136                                  54,150                                   -45,014

Non-US Banks                                        22,313                                42,663                                   -20,350

TOTAL                                                                                                                                                 -65,364

3/1/16   @$1231                         GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                 8,183                                   81,050                                  -72,867

Non-US Banks                                       20,514                                  72,777                                  -52,263

TOTAL                                                                                                                                                -125,130

4/5/16   @$1230                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                 11,099                                 88,208                                  -77,109

Non-US Banks                                       22,788                                 93,900                                  -71,112

TOTAL                                                                                                                                                -148,221

5/3/16    @$1292                         GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                 10,791                                 118,437                                 -107,646

Non-US Banks                                        21,905                                109,511                                   -87,606

TOTAL                                                                                                                                                 -195,262

6/7/16   @$1247                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                  12,704                                73,928                                   -61,224

Non-US Banks                                        21,004                                93,076                                   -72,072

TOTAL                                                                                                                                                 -133,296

7/5/16   @$1359                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                  9,314                                102,684                                   -93,370

Non-US Banks                                        14,622                               113,086                                   -98,464

TOTAL                                                                                                                                                 -191,834

As price fell through the second half of 2016, Speculators dumped longs and The Banks used this selling to buy back and cover their short positions. By January of 2017, the BPR looked like this:

1/3/17   @$1162                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                  11,393                                60,352                                   -48,959

Non-US Banks                                        24,501                                49,264                                   -24,763

TOTAL                                                                                                                                                  -73,722

As you know, price has rallied in 2017 is a sort of 3-steps-forward, 2-steps-back pattern. As you'd expect, the Bank positions reported via the BPR has ebbed and flowed, too. And by June, with price near its 2017 high (thus far), here's where the BPR stood:

6/6/17   @$1297                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                   8,500                                108,153                                   -99,653

Non-US Banks                                        20,128                                 96,962                                    -76,834

TOTAL                                                                                                                                                 -176,487

As you can see, The Banks were playing the same game in 2017 and they played in 2016, taking the short side of the trade versus the hedge fund and other Spec longs. In what should then come as no surprise at all, price was hammered lower over the course of the next five weeks, falling from $1297 on BPR survey date June 6 to $1215 on BPR survey date July 11.

At this point, the July BPR data was surveyed from the Commitment of Traders data taken that same afternoon. The CoT data was astounding, showing some of the lowest Speculator and Commercial positions since late 2015. It looked like this:

And the July BPR revealed this:

7/11/17   @$1215                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                  14,013                                78,063                                   -64,050

Non-US Banks                                         26,675                                67,373                                   -40,698

TOTAL                                                                                                                                                 -104,748

Since the CoT and BPR had changed so dramatically in a month, there was hope across the gold blogosphere that maybe, just maybe:

  • The Banks were moving to quickly cover shorts and get out of the manipulation business
  • The Banks knew that the game was nearly over and they needed to act fast
  • The Banks were fearful of Andrew Maguire's alleged 250 mt order and were desperate to reduce their potential short liability
  • And so on and so forth

Instead, while price has rallied form those early July lows, the latest BPR reveals that nothing has changed at all. The Banks aren't afraid of anything. There's no banker blood in the streets. Instead, the data shows that they're still just playing the same old, tired game.

8/1/17   @$1270                          GROSS LONG               GROSS SHORT                  TOTAL NET

US Banks                                                  9,767                                103,249                                   -93,482

Non-US Banks                                        20,357                                81,733                                    -61,376

TOTAL                                                                                                                                                 -154,858

So, The Banks used the latest 4.5% rally in price to increase their summary NET short position by nearly 50%. And again, this is not a sudden rush of mining companies beating down the Banker's doors in a desperate attempt to sell forward their remaining 2017 production. Instead, The Banks are simply once again playing their (profitable) game of supplying the paper derivatives to The Specs while using their infinitely deep pockets to wait them out until price can once again be rigged lower. Again, unlike what some had so fervently hoped back in July, nothing has changed. The Banks haven't changed course and they certainly aren't taking any preemptive measures against a sudden price "reset".

In the end, what does this mean? Business as usual, I guess. We'll continue to monitor the Bank and "Commercial" positions and look for buying/selling signals based upon historical references. And in the meantime, we'll have no illusions about who is really in charge of these fraudulent and manipulated paper metal "markets".

TF

www.tfmetalsreport.com/subscribe

81 Comments

Markedtofuture's picture

First

First

Turd Ferguson's picture

Silver $17.11

MODERATOR

Everyone be sure to watch the 100-day and 200-day MAs as we discussed in yesterday's podcast.

puro oro's picture

Good

Morning Turdville

bfarley2's picture

Using those numbers, I did an

Using those numbers, I did an excel regression on gold price v. net short position.  The banks add 1400 net shorts for every dollar rise in the price of gold (adj R2 of .89).

The interesting part was the y-intercept of the equation: $1051.90.  Any lower than that and the banks are net long.

No telling how many shorts the banks are willing to add to the upside, but it looks like Dec '15 certainly marked the bottom.

silver10sguy's picture

Good Stuff Turd

The banks really suck!  We all keep hoping that maybe this time will be different.  August until October is the period where historically most market crashes have happened I think.  We are coming up on the 46th anniversary of Nixon closing the gold connection to the dollar in 1971.  I was watching Nixon on a You Tube video talking to the American public and saying this would have no effect on things like buying a car.  Are you kidding me?  My dad bought me my first car so I could commute to a junior college for $3,200 around the summer of 1971.  I bought a new Honda Fit in late 2015 for $20,000.   If Americans really learned about the monetary system they throw out all these crooks overnight.  

AGXIIK's picture

The Fed knows how to boil us frogs

Slowly at first, then really fast

AIJ's picture

Well if silver can get moving again

Along with my FinTech, I would be a very happy person.

...making up for lost time.....

JQuest's picture

Hummm...

Dr Copper is taking a dive....

Joseph Warren's picture

Subverting Trump

Blythesshrink's picture

1% cap in Gold and 2% cap in

1% cap in Gold and 2% cap in Silver being applied.

canary's picture

Miners....

The old saying that miners will front-run the metals may be wrong. After six years of trashing them repeatedly, investors must be afraid of even touching them....I think, this time, they need more confirmation from metals, before buying miners.

canary's picture

OI (final)

Gold Future  +15,670

Silver Future  -31

In gold...Deja vu. Specs are buying, commercials supplying them new shorts.

In silver...More interesting.... a lot of shorts being covered...by who?...I'm not sure....But it's a good sign for us, anyway.

NUGTCALL's picture

Now if AM.could put his

250 ton order in today we may finally exact a little revenge on the MFers

Marcrward's picture

I despise liars, stealers and cheaters

Why I joined forces with Brian Barrett of ARGold to launch the AfroZoom Energy Plan and the first Crypto-Metal Exchange.

Open bid auctions of Cryptocurrency for Metal delivery.

Afrozoom.energy

password: zoom

Marcrward's picture

Unleash the power of your stack

Stack of Metal, Stack of Zoomcoins, Stack of knowledge...

CME Group is a closed loop algorithm, how much statistical evidence do you need to confirm that? An Artifical Neural Network predicting the next tick over 4,000 times per day at 88% accuracy?

Why listen to fraudsters? because everyone else does? Not setting your future generations up for success through those communication channels.

This is why Turd started his own communication channel, to speak truth in the universe of lies.

Help Brian Barret and I continue that.

Cheers.

garth's picture

GDX at $23.03

I forget who posted here the importance of being over $23?  Anyone know - Are the Swiss done selling their miners or is there more selling to go?

Marcrward's picture

who cares about debt digit complex fiat announcements

only those in psychosis believing/assuming/HOPING their debt digits will acquire energy in the future.

Our AfroZoom Energy Plan is extensive, does not involve debt currency, and will attract all miners to our transparent OPEN BID AUCTIONs for METAL.

marc@afrozoom.energy

I will reply with our current Energy Plan and how we know it will create GENERATIONAL WEALTH.

Marcrward's picture

there is no monopoly on good ideas

help me make this idea better and manifest it in our reality.

fluxplus's picture

Assult on gold and silver started

Assault on gold and silver started with no move in JPY/USD and POSX.

Havenstein's picture

Marcward

Your energy is inspiring. You're making a difference. Good luck brother.

- H.

Marcrward's picture

I'm just 1 person

the energy of the crowd inspires me.

Energy of my 4 children, hate to see their future energy consumed today via psychosis that nobody realizes because they were born into it.

All of us born into pyschosis.

Joseph Warren's picture

re: 1% Gold cap 2% Silver cap

if it averages closing up that much every week, I'll take it !

I'm not greedy wink

Angry Chef's picture

Surprised Nobody Posted This... Dave Kranzler & Rory Hall

http://investmentresearchdynamics.com/the-bitcoin-bubble-hidden-risks-and-the-nsa/

...so no. Satoshi Nakamoto did not invent BitCoin. Now trade it and make as much as you can and pour it back into something non-fiat.

canary's picture

Chuck Butler

I wanted to talk a bit about the news this week from Wells Fargo Bank, who had already admitted that they had opened accounts for people fraudulently, now has another problem... Wells Fargo acknowledged Friday that for six years about 570,000 of its customers were charged for auto insurance they didn’t need, potentially driving some to default on their loan and have their cars repossessed.  OMG! What the hell is going on here?  Well, the article can be read here : https://www.washingtonpost.com/news/business/wp/2017/07/28/wells-fargo-charged-570000-customers-for-auto-insurance-they-didnt-need-potentially-forced-some-to-have-cars-repossessed/?utm_term=.129747804704

streber's picture

Continuing the Cliff High debunking by Newager23

Again, thx for that detailed summary.

I concluded decades ago that there are NO gurus to save you.
In the end you must invest for yourself.  Make your own decisions.

Anyone who really knows wtf they are talking about doesn't have to sell you a newsletter.
They are living lakeside, in a Swiss chalet and simply picking up the phone to make a trade here and there.
I forgot, you can trade online now.  Don't even need a phone.

Here is something I made my boys commit to memory early on:

In battle or business
Whatever the game
In law or in love it is ever the same
The struggle for power
The seeking of wealth
Let this be your motto
Rely on yourself

Marcrward's picture

streber

There is no debunking clif high. I am executing dozens of webbothits as I type, they are all in motion.

Silver delivery 

Crypto for Metal Auction

Riding the Dragon

Court case to get silver manipulation judgment

Yes, no one will save you, we have to save ourselves, our families, our friends.

Individually we are weak, together we are strong.

Why do you think the base tactic is to divide us. we need to see through the psychosis we were born into and understand the complex lives off our energy by paying us in our future energy today.

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