Assessing Another Bank Participation Report
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Friday brought the release of the latest CFTC-generated Bank Participation Report. What can we glean from reviewing it? Likely not much, given that JPM was just fined for repeatedly providing the CFTC with false and inaccurate data.
First, an apology. What for? My crime was foolishly believing and trusting the CFTC-generated data. About a year ago, I even went on Max Keiser's show in order to proclaim it as loudly as possible:
From the CFTC's own Bank Participation data, it seemed that JPMorgan had flipped their huge and perennial NET SHORT position into a NET LONG position. This, I thought, would be the key to a rally in late 2013. It wasn't. In fact, it was all a lie. Not on my part, but on JPM's.
Two weeks ago, the CFTC quietly issued this press release: http://www.cftc.gov/PressRoom/PressReleases/pr6968-14
From the release, here is the salient paragraph (with my emphasis added):
"The CFTC Order specifically finds that since at least 2012, the CFTC was notifying JPMS about errors in its large trader reports, which increased in frequency throughout the year. CFTC Regulations require FCMs to submit information on a daily basis for certain large traders, such as the number of open futures or options positions; the number of delivery notices issued or stopped; and the number of Exchange For Related Positions (EFRPs). In December 2012, the CFTC notified JPMS that the on-going problems were unacceptable. JPMS, relying on its third-party vendor that generated the reports for JPMS, assured CFTC staff that the problems would be resolved on or before the end of January 2013. However, JPMS continued to submit large trader reports that contained hundreds of errors throughout the period from February 1, 2013 to February 2014."
So, during the time period during which the CFTC-generated Bank Participation Report was showing huge changes in the "US Bank" positions, JPM was routinely submitting reports that contained "hundreds" of errors. And for willfully misleading the me, you and everyone else, JPM gets a slap on the wrist for a whopping total of $650,000. Any wonder why I continually refer to the CFTC as a criminal co-conspirator in the ongoing manipulation scheme?
With all of this in mind, what are we to make of the latest Bank Participation Report, issued last Friday. If your answer is "NOTHING", then I strongly encourage you to stop reading right now and move onto the podcast. If, instead, you think this information may still be valuable as it allegedly shows the positions of the other 23 largest banks....and if you think these other 23 banks are somehow less corrupt than JPM...then, by all means, read on.
One year ago, gold had decisively bottomed after a brutal, forced, manufactured and counter-intuitive "correction". Having fallen from $1800 in October 2012 to $1180 in late June 2013, price had recovered to $1283 on 8/6/13 and a Bank Participation Report survey was taken that evening. Here's what it showed:
DATE GROSS LONG GROSS SHORT TOTAL
US Banks 90,949 31,476 +59,473
Non-US Banks 25,957 47,996 -22,039
TOTAL 116,906 79,742 +37,434
If this data is to be believed, look again at the huge NET LONG position of the US Banks, primarily held by JPM. And this was after they were hugely SHORT from time immemorial.
What has happened in the twelve months since? Price did not rally into year end. Instead after a brief rally in August, it fell again back , back down to The Double Bottom near $1180 in late December. From there another rally materialized that took price to $1392 before being hammered lower again in March. The rally in July was then capped at $1345 and, as the current survey was taken last Tuesday, price had taken a complete round trip and was back to $1285. With this in mind, take a look at the current BPR:
DATE GROSS LONG GROSS SHORT TOTAL
US Banks 26,119 43,151 -17,032
Non-US Banks 17,083 80,132 -63,049
TOTAL 43,202 123,283 -80,081
So, taking the data for what it's worth, what do we see? A rather remarkable and clearly manipulative change.
Over the past 12 months, after gold was decisively and deliberately rigged lower, the 24 Bullion Banks have gone out of their way to contain price lower and keep it from rallying back. How do we know this? Simply look at the change of positions and keep in mind that, in a full 12-month timeframe, price is UNCHANGED.
Let's start with the "Non-US Banks". This category includes such honest and reputable <sarc> firms as The Scoshe, UnlimitedBS, Barclays, HSBC, DoucheBank and others. As a group, over the past twelve months they have cut their GROSS LONG position by 8,874 contracts or about 34%. At the same time, they have increased their GROSS SHORT position by 32,136 contracts or about 40%. Pretty handy, huh?
But the real action is in the US Bank position, a group dominated by JPMorgan but also includes such notable TBTFs as Citi, MorganStanley, Tungstenman and MerrillLynch/BofA. Over the past twelve months, this maleficent group has decreased their reported GROSS LONG position by 64,830 contracts or 71%. They've also increased their GROSS SHORT position by 11,675 contracts or about 37%.
Putting it all together, these 24 banks have been able to cap price and keep it unchanged by adjusting their NET position by 117,515 contracts. That's a NET change of over 365 metric tonnes of paper gold. Incredible!
What does this mean going forward? Well, if The Banks are intent upon continuing to squash price, they're going to have to do it from the naked selling side as their combined GROSS LONG position is already greatly depleted. To do this, they are going to need a steady and dependable supply of leasable gold in London, so it will become very important to keep an eye on the GOFO rates. If we see them flip to negative again, as they did for two days last week, it will indicate that supplies are short and that a rally is imminent.
AGAIN, PLEASE TAKE ALL OF THIS WITH A MOUNTAIN OF SALT. If JPM can routinely submit "hundreds" of falsified reports to the CFTC, all of the other banks might clearly being doing the same. If, instead, you choose to believe that this data is mostly accurate and helpful, then these past twelve months should simply provide you with more evidence that The Bullion Banks are in the business of capping, controlling and manipulating the gold market. Until they lose control...and The Empty Vaults of London would suggest that they are getting close...expect to see a continuance of the same desperate, naked shorting that we have seen for years.
Finally, at the top of this page is a podcast player. Loaded into that player is my interview by Dr. Dave Janda that was recorded yesterday. You might give it a listen when you have a few spare moments.
Thanks for reading,