Comex Gold Open Interest

Wed, May 4, 2016 - 11:12am

In defending their long held short positions, the Comex Banks have now issued enough new contracts to drive total open interest back to levels not seen since 2011. Will they be successful in capping price or are they about to get a religious experience? We're about to find out.

Let's start with the basics so that we're all on the same page....

The Bullion Banks act as de facto "market makers" on the Comex. In doing so, they have the ability to create new futures contracts for trading across the board. In a sense, there are three possible transactions:

  • A Bank issues a new contract. A willing Spec buyer (long) takes one side and the Bank (short) takes the other. Net result = 1 new contract and total open interest increases by that one contract.
  • A Bank issues a new contract. A willing Spec seller (short) takes one side and the Bank (long) takes the other. Net result = 1 new contract and total open interest increases by that one contract.
  • A buyer and a seller meet ( the bid and ask/offer) and they exchange an existing contract at the current price. Net result = No change in total open interest as no new futures contract has been created.
  • On The Comex, where The Banks seek to manage and control the paper price, since time immemorial The Banks have been NET short and the Specs have been NET long the paper contracts. The degree to which The Banks are short and the Specs are long fluctuates daily and, once per week, the CFTC surveys all of the market participants to get their summary positions. This data is compiled and released every Friday as the "Commitment of Traders" report. far so good?

    Now here's where the fraud begins. The Banks, acting in their capacity as "market makers", have a virtually unlimited power to create from thin air as many Comex paper derivative contracts as they'd like. In doing so, The Banks take the risk of being short while the Specs, in taking the other side of the trade, take the risk of being long. The fraudulent game that The Banks play is in never being forced to deliver upon of their paper obligations. The Specs simply seek gold "exposure" so they buy the paper derivative contract and The Banks sell it to them. If prices go up, the Specs make fiat and The Banks lose fiat. If prices go down, The Banks make fiat and the Specs lose fiat.

    Again, though, very little physical gold is ever delivered. Thus, the only price "discovered" is the price of the derivative itself, not the actual physical metal.

    Having the unlimited ability to create new contract supply gives The Banks the nearly unlimited ability to control price, too. How? Think of it this way:

    • You call up your broker at Merrill Lynch and tell him to buy you 200 shares of Coca-Cola. A market order is submitted and someone, somewhere sells their existing 200 shares of Coca-Cola to you. The supply of Coca-Cola shares is finite on any given day so price must find an equilibrium where buyers and sellers meet.

    However, as we laid out at the beginning of this post, that's NOT how it works on The Comex. Oh sure, most of the volume each day is an exchange of existing contracts. However, volume is also supplied by The Banks simply creating new contracts to sell to buyers. Go back to the bullet point above. How fair and legal would it be if your broker, instead of finding a seller of existing Coca-Cola shares, decided instead to simply create some new shares out of the blue and sell them to you? You'd have your long exposure to Coke and your broker would take the risk of being short Coke.

    Not only would this be patently illegal and fraudulent, think of the impact this would have on the price of the Coca-Cola shares. Since willing sellers wouldn't need to be found for new buyers, price wouldn't need to rise in order to entice sellers to sell. Your broker would simply take the risk of being short Coca-Cola, all with the hope and the plan of seeing you eventually give up and sell your Coca-Cola shares back to them, likely at a lower price and at a profit for your broker.

    And, again, this is EXACTLY how The Comex operates.

    Without having to supply any additional physical gold or other collateral, The Banks simply create new gold derivative contracts whenever demand for contracts exceeds available supply. This has the obvious effect of dampening price moves as "price" isn't forced to find a true equilibrium between buyers and sellers. And this has played out for all to see here in 2016.

    We've written about this before, most recently two weeks ago: However, open interest has expanded so dramatically in the two weeks since, it seemed we had to write about this again today.

    Again, what is happening here is an overt attempt to contain and control price. If the total volume of available open interest on the Comex was anchored or tethered to a fixed amount of collateral, then the supply of derivative contracts would be relatively stable like the daily supply of available Coca-Cola shares. Instead, The Banks simply create new supply nearly every day and, in doing so, restrict and manage the daily movements of "price". It looks like this:


    1/26/16 $1121 385,350 175,176 contracts or 545 metric tonnes of paper gold

    2/16/16 $1209 428,912 259,784 contracts or 808 mts of paper gold

    3/8/16 $1264 499,110 311,865 contracts or 971 mts of paper gold

    4/12/16 $1261 504,523 353,968 contracts or 1,101 mts of paper gold

    4/26/16 $1243 497,994 356,553 contracts or 1,109 mts of paper gold

    And now here's where it gets particularly egregious. Over the past week, the price of "gold" has risen by $49 to Tuesday's close of $1292. While that's still a significant move of nearly 4%, how much higher would the price of gold had risen if the total open interest, which has already been inflated by over 25% over the past 90 days, wasn't allowed to rise farther still? And, as of yesterday (Tuesday) it looks like this:

    5/3/16 $1292 565,774 410,000 contracts at a minimum or 1,275 mts of paper gold

    I'm going to stop here to let that sink in for a while....

    So, to control/manage price and to keep the rally contained at just $170 or 15% in the past 100 days, The Comex Banks have issued a whopping 180,424 new paper derivative contracts, growing the total Comex open interest by 47%! Not only that, but 180,424 new contracts is the paper equivalent of over 18,000,000 ounces of "gold", created from whole cloth and sold to the Speculators, all without additional capital or physical collateral requirements.

    As noted above, the GROSS short position of The Comex Banks has more than doubled from 545 metric tonnes to as much as 1,100 metric tonnes today. This means that if The Banks were ever forced to make good on these paper short obligations, they'd have to physically deliver more than the entire stated holdings of Switzerland! Additionally, the entire Comex vaulting system only purports to hold 7,300,000 ounces of gold. So when The Banks are short 41,000,000 ounces of gold, aren't they fraudulently selling something that they don't own? (And please don't give me that line of garbage about producers hedging and selling forward. That scheme ended years ago.)

    At the end of the day, you must understand the implications. The Banks are doing everything in their power to manage price...and why wouldn't they?!? When you're short 40,000,000 ounces of gold, every $10 move "costs" you $400,000,000. A $100 up move from here generates paper losses of $4,000,000,000 so they are fighting tooth-and-nail to keep that from happening by doubling down and putting "bad money after good" in the same way that a blackjack player thinks he will eventually win a hand and get all of his lost money back.

    The Banks hope that eventually they can spark a Spec selloff. Once the Specs head for the exits, this Spec selling will be utilized by The Banks. They'll take the other side of the trade and buy their shorts back. The Banks will then "retire" those contracts and total open interest will decline. The Banks will hope to engender enough Spec selling to allow them to cover (buy back) up to 100,000 of their ill-gotten shorts and drop total open interest back to the 450,000 level. The question is: Will they be successful? While this has been a foolproof business plan since 2013, it hasn't worked thus far in 2016 as Spec fiat has continually flowed into the paper gold derivative market.

    So watch price and open interest very closely in the days and weeks ahead. The increasingly-desperate Banks are apt to openly raid price in their efforts to spur some Spec selling. The upcoming jobs report of this Friday being an obvious starting point.

    In the end, however, I'll leave you with one, final thought. Now that the Chinese have pricing power in gold, they quite literally have the ability to completely screw and hammer the Comex and London Banks. They can raise the Shanghai Fix and enable the immediate arbitrage. They could use this tool to drain whatever gold is left and utterly crush every big, western Bank.

    But the time is nigh. If The Banks successfully rig the price back down, squeeze out all the Spec longs and close back up 150,000 contracts of OI, The Chinese will miss their opportunity. So, will they take it? Maybe. Maybe not. Maybe they're not yet ready. We'll just have to wait and see.

    Again, watch price and open interest very closely in the days ahead. It's crunch time and things are going to get increasingly volatile. Prepare accordingly.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    May 4, 2016 - 11:23am
    Royal Flush
    May 4, 2016 - 11:24am



    I love the way you expain things so completely! I have never owned paper. My grandfather told me a long time ago that if I didn't have it in my hand I had nothing. I have done well with that way of thinking so far.

    I would love to try some pm stocks but.....

    May 4, 2016 - 11:25am

    I vote for religion

    Ooops, sorry Marchas.

    These bankers need religion, desperately! First, they need to "reap wha they sow." then I'd like to see some repentance and conversions stories going public, and finally an industry-let movement to clean up banking, break up the big banks, root out the vermin and monkeys, and move to a local model where you actually know the people in banks that you deal with. (I must still be asleep, dreaming).

    Do we really even need banks?

    May 4, 2016 - 11:27am

    Top 5

    There's now a handful ;-)

    May 4, 2016 - 11:28am

    Turd at his best!!!

    That was soooo excellent! I'm printing it up for my wife (and anyone else I come across) right now. Thank you!!!

    May 4, 2016 - 11:28am

    Fufth...Dagnabbit - Suxth...

    May the Fourth be with you....

    May 4, 2016 - 11:34am

    Top ten Wahoo!

    The missus and 2 female cats all snoring stenorously!

    Time for me to join them.

    Feeling an epic rant building after watching that Criminal in Chief and his exit speech - maybe tomorrow I'll let her rip.

    Donno out

    May 4, 2016 - 11:36am


    Ring Around The Rosy | Nursery Rhymes | By LittleBabyBum!
    May 4, 2016 - 11:37am

    Naked Exposure?

    I'm sure the banks have reduced their risk with some prudent insurances and additional derivative sales. Think AIG and "the Big Short". Why else would the 450,000 share "floor" be so high? It's a game of marginal risk, not total risk.

    May 4, 2016 - 11:39am


    I'll take it... hopefully thurd will transpire as good omen for us all

    The last time the HUI was in the red three days in a row was January 19th!

    May 4, 2016 - 11:39am

    this is probably overly simplistic... i am not as savy as many of you here...
    but the only way you move up is to rub elbows with folks who know,
    hence my subscription...and my tiny stack.
    if it's going to be manipulated with impunity, in perpetuum...
    like, buying up what's in ground,
    there will be a time where delivery counts, right?
    and the miners have suffered so bad and many will take years to really push out what's needed, regardless of price...
    won't this allow for some true value to surface?
    every move "they" make lately just serves to confuse me further.
    it seems in my kindegarten view that there would still be an opportunity to quash all of this.
    if it's demanded...
    am i so far off? alas, i am admittedly not savy...
    and that's why i rub elbows with the turd foundation. thanks to anyone who could help clarify, in layman's terms, what this all COULD mean. i love speculation!
    just as long as it don't kill my baby stack <3

    Angry Chef
    May 4, 2016 - 11:41am

    SHADOWRING : The Power Behind The Throne

    I just finished reading the comments from the previous thread and then I listened to the interview below at SGT Report.

    In it they talk about the CFR and there role in world events but also about Trump and Hitlery. I'm going to watch the Directors cut. These Globalists have to be stopped before they get us all killed. And it's not to far of a leap to think that they aren't behind the control of the Gold price and the fiat dollar franchise. I know most Turdites know this but I'm posting it for those that are new to the system.

    May 4, 2016 - 11:43am

    Will somebody open a

    Will somebody open a tradedesk at SGE already. Take a Crimex naked short for a ride.

    Royal Flush
    May 4, 2016 - 11:43am

    The meaning of life, the universe and everthing

    is to confuse you! stack higher while it is cheap!

    May 4, 2016 - 11:44am

    That's true

    And this post is not about Bank risk.

    This is about the ability of The Banks to fraudulently create a virtually unlimited amount of paper gold in order to meet Spec paper demand. This has ZERO bearing on the fundamentals of physical gold and it unfairly distorts "price".

    May 4, 2016 - 11:50am

    Anyone get the feeling the

    Anyone get the feeling the banks are desperately trying to walk gold down so that it doesn't completely explode past 1300 on Friday

    May 4, 2016 - 11:53am

    That's true

    So why do you(we) over focus our energy on OI. Wouldn't we better served to understand the physical markets. It is these markets that will ultimately control price. So I would like your charts, analysis, podcasts to focus on this. Why not?

    May 4, 2016 - 11:53am

    That's true

    So why do you(we) over focus our energy on OI. Wouldn't we better served to understand the physical markets. It is these markets that will ultimately control price. So I would like your charts, analysis, podcasts to focus on this. Why not?

    May 4, 2016 - 11:53am

    That's true

    So why do you(we) over focus our energy on OI. Wouldn't we better served to understand the physical markets. It is these markets that will ultimately control price. So I would like your charts, analysis, podcasts to focus on this. Why not?

    May 4, 2016 - 11:55am

    btw...turd, you have simplified really nicely...

    no offense to you as i am just a bit slower at all of this. i guess my worry is that the "arbitrage" could be a bit premature and that our own dear comex is successfully shooting us in our own feet, with nary a worry to their own.
    i have been saving pennies to try to get just a tweedy tiny exposure in miners...and cannot afford to even speculate at juniors...and that drives my investment sink up considerably for what i have to buy with. everything is happening so fast as of late...
    guess i should drop my lemonade and get to searchin'.
    i was hoping to piecemeal something together to afford anything in the future, like just a tiny piece of first majestic stuck in my sock for goodness sakes.
    even payin' attention for years may not be quick enuf. sheesh.
    no wonder you get so crestfallen all the time.

    May 4, 2016 - 11:55am


    HUI going to close the gap at 219 and 209 all in one day. Awesome! Everything I own is now way off their overbought levels. If we close that 209 gap and then reverse hard today it will look good. EOD trading will tell you a lot.

    May 4, 2016 - 12:01pm

    Will there ever be justice?

    There really is no justice or rule of law for these people...
    The regulators turn a blind eye, while fraud runs wild.
    For them, white collar crime really does pay, doesn't it?
    Their system deserves to break and it's long overdue...

    ...I wish it was today....

    May 4, 2016 - 12:02pm

    Basic explaination!

    Thank you.

    Good Luck All...


    May 4, 2016 - 12:05pm


    First of all, I am no expert either. I think that prices are manipulated, and new schemes keep arising to manipulate prices. (I think that the invention of the GLD, for example, has mainly served to divert investment from physical metal and suppress price.) However, there is a market price and it is typically not far over that of the paper spot price. You can buy coins and bars of gold at relatively low premiums over spot. When someone tells me the true price of gold is $5000 or $10,000 or whatever, I just think NO IT ISN'T. Not today anyhow. The true price of gold can be found any minute of the day on JM Bullion's web site or any number of other dealers. If the true price was $5000 and JM Bullion was selling for one fourth that price, the supply of gold would be wiped out immediately. As long as we have a supply of physical gold traded at a price that sellers and buyers agree upon, then that is the market price, like it or not.

    Something like the GLD can probably reduce demand by diverting currency that would have been converted to physical gold. The price raids can paint technical patterns on charts that influence traders. It can also influence sentiment of potential buyers. However, there is a limit to what manipulation can do, and that limit is enforced by the free market exchange of physical gold for currency. Until the buying and selling of gold is outlawed, or there is no one willing to exchange physical metal near the paper price, then we have a functioning market. The price is the market price. If you think it is a bargain, then buy some gold!

    C1 TF
    May 4, 2016 - 12:06pm

    The Ability to Crush

    My point was that the banks have an insect-like ability to survive the crushing blow. I agree completely (maybe even reverently) in the smoke and mirrors of their regulator condoned fraud. You explain it better than anyone. But can any entity crush them? They are willing to bring the world down, and have enlisted some mighty allies to assist them. Stacker's belief is that the invisible hand of the market will eventually create the real market; one where no one will sell their metals for the artificial prices.

    We'll see.

    May 4, 2016 - 12:11pm

    I'm sitting tight

    And decided NOT to look at the prices (gold, silver, miners) today anymore. My imagination is sufficient.

    May 4, 2016 - 12:16pm

    TF - Best Explanation Ever

    Thank you kindly.

    This should be required reading for anyone who comes to the site.

    May 4, 2016 - 12:21pm

    @matt_ and royal flush...

    thx guys,
    yeah i know it's to keep the common man skerred of physs...
    i am stacking! i just diversified a tiny bit outside of my lover, silver..
    "baby, i'm ain't cheatin'! i'll turn her over fer you as soon as i can get more of yer shiny, shiny love<3"
    my stack just turned her head at me.
    but i really wanted to get in miners alittle and am worried that all this new push will make it cost prohibitive. just called my brother over it and he told me to pick my lemonade back up and get in the garden.
    that's my "job" today.
    these moves are big and i see the potential backlash..
    alas, as we've all seen... it'll probably take weeks and i hope months....if not years,
    God bless it
    just, when even a kindergartener can see rings bells.
    i just hope there silver<3 you guys think first majestic is a good one? i also saw where they had a financing/bulk option offa' nuemeyer's first mining finance...i have a paltry sum to give.
    (and what's all this talk of never being able to actually get the "certificates" of ownership.
    i am soo behind the eightball as far as understanding miners...but really want 'em.
    lemonade and research....the garden's weeds ain't going anywhere. heh<3

    question matt_
    May 4, 2016 - 12:24pm


    What you say makes sense up to a point; I wonder though how things would change if a large portion of paper gold contract buyers were to attempt to enter the physical market instead.

    May 4, 2016 - 12:33pm too! that's my worry...

    don't force a hand unless you gotta' flush or something!
    just sayin'...
    holy cow, my feathers are ruffled lately.


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