TFMR Podcast #36 - Alasdair Macleod of


Earlier this week, I spoke with Alasdair Macleod of GoldMoney. He's written several, extremely valuable articles recently and I thought it would be great if we could hear directly from him. Fortunately, for all of us, he gladly obliged.

The primary focus of our discussion was this great piece that Alasdair posted earlier this week: So that you can look it over while listening, here's a C&P of the entire thing:

Gold futures market heading for crisis

I thought I had a good idea what disasters we might face in 2013, and then I saw the most recent US Commodity Futures Trading Commission’s Bank Participation Report for gold and silver. On the basis of recent BPRs these markets are heading for a crisis, which is generally unexpected. I shall break the reader in gently by looking at gold first.

The first chart below shows US banks’ net short exposure to gold up to December 4. Between February and August the US banks managed to reduce their net shorts from 104,717 to 57,689 contracts against a background of a declining gold price. This is logical, to be expected and sensible position management. However, when the gold price turned up after the August BPR, net shorts rapidly rose to new highs, and over the last month unexpectedly increased again while the gold price actually declined. This is a sign that the US banks, of which only five made returns for December, are having difficulty keeping a lid on the market that emotionally at best is neutral, but most probably somewhat oversold. This differs from an over-bought market with potential profit-takers to shake out, as was the case when gold traded at $1,900 per ounce and the same banks were able to bring the gold price back under control.

The next chart is of Non-US banks’ net shorts, which tells a very different story. From October 2011 these banks increased their short positions, with a sudden jump between August and October, before sharply reducing their net positions to 44,707 contracts this month. It appears that some of the shorts have ended up on the US banks’ books, pushing their shorts to uncomfortable levels as shown in the first chart.

The jump in these net shorts between August and October was comprised of sharp rises in both longs and shorts involving swap dealers and the other commercials. Longs more than tripled from 9,199 to 34,881 and shorts rose even more from 49,772 to 113,445 on a rising gold price. The likely explanation is that buyers materialised through some of these non-US banks, who hedged by buying futures contracts. A dealer or dealers at one or more other non-US banks saw the price go against their shorts and tried to kill it by massive intervention. Subsequently, when the US banks sold the market down from the October rally these non-US banks took the opportunity to reduce their shorts to more normal levels.

This information is particularly revealing, given that the Commitment of Traders Report shows a substantial reduction in the Commercials’ net position by 34,551 contracts for the week to the same date as the BPR, giving an impression of a market being brought back under control. The BPR suggests otherwise.


While there is a large stock of gold that can theoretically become available at higher prices, the same cannot be said for silver. We shall look at the position of the US banks first. The first silver chart shows that even though silver is trading well below its 2011 highs, US banks’ net shorts are substantially higher than might be expected. The long figure is down to only 625 contracts, while the shorts are 40,198, so these less-than-four-banks that reported last week have a net short exposure of nearly 200,000,000 ounces, or twice the estimated annual supply of silver available to investors after industrial demand is allowed for.

The final chart shows the non-US banks’ net shorts. Unlike their exposure to gold, these banks are in the same deep trouble as the US banks, having made the mistake of turning a broadly level book as recently as the August BPR into a record net short position on the August-October price rise. This is a vicious bear squeeze on them, which added to the US banks’ position amounts to a total short of 290,000,000 ounces. This figure compares with net shorts of only 120,000,000 ounces when the price was successfully taken down from its all-time highs early last year.


The silver does not exist to cover these short positions, and it will take very little further buying to set off a crisis in this important market. In the case of gold, there have always been central banks with physical bullion available to ease market shortages, but so far as we are aware the strategic silver stockpiles of previous decades are exhausted. There is therefore no price at which these shorts can be closed.
Bank positions in both silver and gold seem to have been adversely affected by “events unknown” from the August BPR onwards. All attempts by the banking community to regain control of these important markets appear to have failed.
Since the date of the latest BPR (December 4), there have been three serious attempts to reduce these short positions and each time the same $32.60 level has held firm. This suggests that a buyer or buyers larger than the banks are prepared to take them on by buying the dips. This price action supports anecdotal evidence that physical bullion in important markets such as London is in short supply.
On this evidence, and assuming the trend continues, there will shortly come a time where NYMEX will be forced to declare force majeure in this market, which they can do under their rule book. The consequences of this extreme action could well be destabilising not only for the price and demand for silver but also disruptive for gold.
Therefore, we must add the breakdown of precious metals markets to the list of systemic dangers we face in the New Year.


Finally, following the podcast, you should take a few minutes to review some of the other, enlightening articles that Alasdair has written lately:



Dec 15, 2012 - 12:59pm

Which will break ranks first?

To me, this is the million dollar question.

My trading portion is split evenly between gold and silver.

If the metals break-out together, then the mix doesn't matter.

If one breaks out before the other, then I need to be positioned more towards that metal. I can then equalise the mix when the other starts moving.

Is silver being restrained so as not to inspire gold? If so, then silver is likely to break first, because that is the first line of defence to contain the gold price.

If silver is being contained primarily to protect derivative positions, then gold is likely to break-out first.

decisions, decisions........

Dec 15, 2012 - 1:10pm

Reaction to events...

I think when and if events break as described that whatever decisions we make now and hope to employ will be tough (if not impossible) to execute because at that point the markets will either freeze or plunge and trading electronically might not even be possible.

Trying to trade PM'sl ocally at your LCS might even be hard to do as those folks who run those places are not going to carry on with business as normal when something very abnormal is taking place.

I think too many things will be going on at once possibly for any resemblance of a normal market transaction being able to take place in a timely (if at all) manner on that days(s). Chaos and anxiety will rule the day(s) afterwards.

Most of us have seen these, some haven't.

Video unavailable
14 Days After The Dollar Crashes, Prepare yourself!

Dec 15, 2012 - 3:05pm

Really great podcast

Thank you Turd- and a hearty thanks to Alasdair as well. This is top-flight analysis and should give us all -stackers and traders alike- some very substantive things to think about.

Please remember, folks- TF provides this kind of top flight access and content for free to us... consider feeding the Turd, or signing up for TTM (I'm very glad I did, it is excellent). You have to give to receive, so lets keep this thing rolling!

Dec 15, 2012 - 3:25pm

Podcast and Donation

Great Podcast!! While I have been reading the posts at TF Metals for quite a while....I just started to post over the last week. I enjoy the site immensely and do feel the sense of community here. I sent a small donation out to Turd today for a couple of's Christmas time, and I do realize that if this site is to continue, donations have to be sent to help out with all of the costs involved in running the site.

Merry Christmas and the best of the season to Turd and all of the Turdites that make this such a great place to spend some time each day.

Dec 15, 2012 - 3:50pm

When will $36 fall?

I am seeking to answer my own earlier question on this.

In a war, when the enemy advances too close for comfort, you start pulling your key assets outside the danger zone, and it may take some time.

The old Wynter Benton mythology described $36 as the point where JPM starts bleeding from every orifice. That level was identified nearly two years ago. Since that time, they will have been busy, I imagine, reducing their derivative vulnerability to $36.

Earlier this year, they had the lowest net short position that they had had in a long while. Many were confident that they were now set to go long. I am on record as cautioning that they were simply in a stronger position than ever to unleash new shorts.

The fact that they did go on to unleash new shorts, and are now in deeper than ever, suggests that they did not yet succeed to unwind their derivative positions around silver. They are desperately trying to smash the price down out of the danger zone, and so far no success.

History tells us that they will use as much firepower as is necessary, and that the price must go down before it goes up, so that they can cover. They are not ready for $36, and there is no regulatory oversight to stop them from shorting to infinity if necessary.

None of us know their derivatives exposure to silver, so none of us can know the blast off date. The excellent analysis that Alasdair describes above, does not portend an imminent break-out, but evidences instead JPM's commitment to defend a certain line, beyond any conventional logic. It is impossible to position oneself for this without inside knowledge. We are down to gut feel, and faith.

Fool that I am, I am ignoring my head on this one, and going with my heart. I cannot bring myself to place a bet on those F*ckers winning.

Yooper Rick
Dec 15, 2012 - 8:17pm


I really like AM's British pronunciation of Turd. I'm still chuckling.

old tradesman
Dec 15, 2012 - 8:47pm

When will $ 36 fall

When will $36 fall?

When crude goes to 93$

Dec 15, 2012 - 9:26pm

@ old tradesman

can you elaborate?

Edward G
Dec 15, 2012 - 10:09pm

Brilliant Podcast, Superb

Really clear on the open interest stuff, thx guys.

As one who intends to spend sunday watching cricket, can I assure everyone that we all speak like Alastair in the UK, lol

old tradesman
Dec 15, 2012 - 11:15pm


can you elaborate? when Saudi Arabia comes into full msm news you will see $36 S.A Is the key to the dollar.

S.A. Is the last of opec(petro dollar) It will probably happen before. But that will be the end of the petrol dollar. No more opec, I new this before jim willie mentioned S.A. in his pod cast a few weeks ago. Remember that the corporations with power and control don't care about where they make the money! Its where they make the money that counts. S.A. will be still under control of the same EE but not in the dollar!

History repeats itself. Same ole Same ole. Wash rinse and repeat. Best advice BTFD get out of paper Its the grand reset. China is ready! In an earlier post Ive said that china has two currencies. One for the people and one for the rich! In which you put your savings in an account, in a bank in which can be denominated into gold silver at the touch of a phone. The Chinese are way ahead and alot smarter than our colledge graduates,(if you can call them that.( most colleges today cant compete with 1920 4th grade english) BTFD Its not going to get better!!! Housing prices down! dollar down! employment In people down(but in hours up) {Those that will work will have Two 29 hrs a week jobs Instead of one 40-50 hr a week job for wages in 1960's silver dollars would be (10.00dollars = 33 cents an hr.)

old tradesman
Dec 15, 2012 - 11:27pm

lets take this a bit further

If you dont like gold or silver. Invest in oil cvx-xom. you will stay just under depreciation(of what they say)

OK try this invest in cca(the new model for industry in america) OK Not good enough put your life savings in a us bank get charged for the service of them to use it at at least 10 to one ratio( as you are devalued 10-20% this last year). All negative returns. I ask all you turdites Why and how does anybody @#$$%in NOT SEE the forest through the trees.(Im talking to myself again)

old tradesman
Dec 16, 2012 - 12:32am

Hands down

I can shut down a thread. Talking to myself again.!!

Mr. Fix
Dec 16, 2012 - 1:06am

It's after 1 AM, old tradesman

is highly unlikely that any one person can shut down the thread.

Although I have seen Turd do it on special occasions.

It is much more likely that a lot of people have simply passed out,

waiting for that “hot explosive historic” rise in the price of our metals.

I am just going to sleep on it.

Good night.

Dec 16, 2012 - 7:26am

@ old tradesman

Mr Fix was right; we are 5 hrs ahead of you here in Blighty, I was in bed when you were posting.

Thanks for the comments, but why is $93 oil so important? Presumably we are talking about a cap on the WTI price?


Dec 16, 2012 - 11:08am
Dec 16, 2012 - 11:26am

Hoarders have more fun !

Hoarders have more fun ! Monedas 1929 Comedy Jihad Hoarders Have More Fun World Tour

Hold over
Dec 16, 2012 - 5:09pm

One for the TURD

Gold Price Manipulation Proven On The Intraday Charts

Based on his statistical research, Dimitri Speck concludes that central banks started to influence systematically the price of gold as of August 1993. His conclusion comes in particular from his intraday statistics, where he observed several anomalies. First, since 1993, the price has been falling systematically during the trading session of COMEX in NY. Another trading anomaly is that during the PM fix the price systematically tends to drop significantly.

Dec 16, 2012 - 5:11pm

Great podcast

Alasdair's opinion that it is pure demand for physical that is the main dynamic just now makes a lot of sense to me.

S Roche
Dec 16, 2012 - 8:52pm


Bear in mind that this was prior to the Washington Agreement.

Considering that the producers tend to sell into the more heavily traded PM Fixing (ie, both London and NY are open), it stands to reason that the afternoon Fix trades lower. When this was pointed out in a comments thread someone asked why they don't just all sell in the, umm...when prices are higher?

Seriously though, my adding this thought to the mix doesn't really add a lot because all it possibly shows is that the "manipulators" front-run the PM Fixing sellers. I see it constantly run both ways. Lots of rumors at the moment that SAC is a large seller due to redemptions due to SEC interest and is being front-run. First the price, then the news.

Loud Noises
Dec 17, 2012 - 3:11pm

Great commentary

This podcast got me thinking again about my dry powder. I have a lot (for me, equal to my stack) sitting on the sidelines because of economic uncertainties. We all sit here eagerly waiting for the game changer that will start TF's HEH call but I also wonder, how much time do we have? I have very little desire to park FRNs in a bank for too long and don't want to miss out on maximum exposure to a true price explosion. But Alasdair's comments make me realize that the action we seek could be in 5 days or 5 years. And in this economy, I might need some FRNs long before then. It all boils down to me thinking about this way too much.

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