August 10th Update ..... Ed Steer's Gold and silver Report ....
http://www.caseyresearch.com/gsd/edition/ted-butler-cornering-the-gold-market
¤ YESTERDAY IN GOLD & SILVER
The gold price 'action' on Friday, if you wish to dignify it with that description, was nonexistent, and the highs and lows aren't worth posting, as the gold price traded in a tight ten dollar range through all of Friday everywhere on Planet Earth.
Gold closed at $1,314.70 spot, up $2.30 on the day. Volume, net of August and September, was very light at only 103,000 contracts.
The silver price 'action' did have a bit of shape to it. After declining about 15 cents in the first half of the day in Hong Kong trading, the price began to rally quietly starting at 2 p.m. local time, and that rally continued for the rest of the trading day day, both in London and New York.
The high tick was recorded by Kitco as $20.72 spot, and that came minutes after 4:15 p.m. in the New York Access market. From there it got sold down about 15 cents going into the 5:15 p.m. electronic close.
Silver finished the Friday session at $20.55 spot, up 30 cents from Thursday's close. Net volume was around 36,000 contracts.
Platinum was quiet as well, and closed up about a percent, and palladium was basically flat. Here are the charts,
The dollar index was even more boring, after opening on Friday in Tokyo at 81.02, it closed the the day in New York at 81.12.
*****
The CME's Daily Delivery Report showed that 203 gold and 10 silver contracts were posted for delivery on Tuesday within the Comex-approved depositories. In gold, there were only three short/issuers, ABN Amro with 63 contracts, Canada's Bank of Nova Scotia with 40 contracts, and JPMorgan Chase with 100 contracts out of its client account. Of course the only long/stopper of note was JPMorgan Chase out of its in-house [proprietary] trading account once again, as they stood for delivery on 193 contracts. In silver, the short/issuer was JPMorgan Chase with all 10 contracts. The link to that activity is here.
I could hardly believe my eyes when I checked GLD stocks yesterday, as there was actually anincrease for a change. An authorized participant added 57,958 troy ounces, and I'm sure that had everything to do with the price action on Thursday. And as of 11:03 a.m. EDT on Friday evening, there were no reported changes in SLV.
I see that the good folks over at the shortsqueeze.com Internet site updated their SLV and GLD short position data for the end of July. In silver, the short position declined by a rather large 23.09%, and is down to 13.33 million ounces/shares. The short position in SLV is now 3.64 percent of the outstanding shares/units in SLV, which is not a big number.
As Ted Butler pointed out two weeks ago when the mid-July report came out, he was expecting that the deliveries of silver into SLV had everything to do with covering a big short position. That has turned out to be the case. There's no prize for guessing who the big short holder might have been.
In GLD the short position only declined 4.14%, down 1.23 million shares, or 123,000 troy ounces of gold. That's not a big drop, and the overall short position in GLD is very high on a percentage basis, more than double the short position that currently exists in SLV.
The U.S. Mint reported sell the magnificent sum of 4,000 silver eagles yesterday, and that was all. It's been a pretty skinny sales month over at the mint, at least up until this point, and I must admit that I'm rather suspicious of the sales numbers that they're reporting. Month-to-date they've sold only 1,000 ounce of gold eagles, 3,000 one-ounce 24K gold buffaloes, and 850,000 silver eagles. That ain't much for seven business days, but I'm sure that the mint will update silver eagles sales on Monday, which has become the normal day of the week that they report them.
Anyway, based on these flimsy sales, the silver/gold sales ratio checks in at 210 to 1, but I wouldn't be breaking out the party favours just yet, especially when one considers the size of the data sample being used. I can pretty much guarantee that this ratio will be entirely different by this time next week.
Over at the Comex-approved depositories on Thursday, they reported receiving 32,393 troy ounces of gold, with virtually all of it going into HSBC USA, and only 321 troy ounces [10 kilobars] were shipped out, all from Scotia Mocatta. The link to that activity is here.
It was another busy day in silver, as these same depositories reported receiving 912,208 troy ounces, and shipped out 798,194 troy ounces of the stuff. Of the amount received, JPMorgan took in a trailer full, 611,851 troy ounces. The link to that activity is here.
Well, the Commitment of Traders Report wasn't exactly what I was expecting, but it was what I hoped for. Ted Butler had some explaining to do on the phone to cover it all, and I'll do my best to give you the salient bits.
In silver, the headline number showed that the Commercial net short position actually increased by a hair under 10 million troy ounces, and currently sits at 51.5 million ounces. Ted Butler's raptors [the Commercial traders other than the Big 8] sold about 3,500 of their long contracts. That is not news in and of itself. The big news is who the buyers were. They were the Big 4 short holders, read JPMorgan Chase. They bought about 2,500 of those contracts. That's a lot, and especially in a reporting week where there was very little price movement.
Ted mentioned years ago that he was waiting for the day when the raptors sold, and JPMorgan bought what they were selling. Ever since he explained that scenario to me, I've always wondered why it never happened, and we've both been waiting for the day that it would. Well, it did for the first time during the last reporting week.
I had always assumed that when this sequence of events did eventually occur, that it would be an arranged event, not natural market forces. I'm still of the opinion that this is the case, but there's no way of proving it. But if I had to bet $10, that's the way I'd bet it.
As you can see, JPMorgan Chase is leaving no stone unturned in its desperate attempt to get out of its remaining short positions in silver, and this is just another front on which it is fighting that war, and since we highly suspect that JPMorgan Chase is a criminal organization, just like the CME Group, this sort of act, legal or not, would be a no-brainer for them.
In gold, I saw that the change in the Commercial net short position was so outrageous, that I knew it had to be wrong. It showed that the Commercial net short position increased by 2.6 million ounces. Ted said that it appears likely that tens of thousands of contracts were added and/or subtracted from the wrong category, as there was nothing in the reporting week's price activity to indicate that this sort of internal change would occur, so we'll have to wait until next week's report to see if they change it, unless they correct it on Monday or Tuesday.
Ted said that except for that internal difference, the rest of the COT report in gold looked pretty normal, as two things occurred to make him think that way. First of all, JPMorgan stood pat with their long position of around 85,000 contracts [8.5 million ounces] still intact, and the Non-Commercial/Speculators added 17,000 contracts to their net short position. They did this by going short around 13,000 contracts and selling about 4,000 long positions.
So, except for what appeared to be a reporting error, the internal structure of the COT Report in gold is still beyond wildly bullish. Anyway, that's the Reader's Digest version of what happened in the COT Report for positions held at the close of Comex trading on Tuesday, August 6, 2013. If Ted has anything else of importance to say to his paying subscribers later today, I'll steal what I can and post it in my Tuesday missive.
The Bank Participation Report [BPR] for August came out yesterday as well, and that data in that report, extracted from Tuesday's COT Report, lays bare the trading positions of both U.S. and non-U.S. banks for just that one day a month.
In silver, it showed that 3 or less U.S. banks were net short 95.74 million ounces of silver as of the close of trading on Tuesday, August 6th. That's a decline of about 5.8 million ounces from the July BPR. I'd guess that JPMorgan Chase is short about 75 million ounces of that, and that would be a minimum. Virtually all the rest would be held by HSBC USA, with a tiny amount owned by Citigroup, maybe.
The BPR also showed that 12 non-U.S. banks were net short 58.04 million ounces of silver. That's a decrease of 4.56 million ounces from the July BPR. I would estimate that two thirds of that 58.04 million ounces is held short by Canada's Bank of Nova Scotia. The remaining short position, divided up more or less equally between the other 11 non-U.S. banks would be immaterial in the grand scheme of things.
Here's Nick Laird's Bank Participation Report graph for silver. The five charts are a snap to read, and it's charts 4 and 5 that deserve the most attention. Notice the big jump in the U.S. short position back in August of 2008 when the silver short position held by Bears Stearns showed up on JPMorgan's books for the first time. And also note the big jump in the short position of the non-U.S. banks when Canada's Scotiabank was forced to come clean in October of 2012. That's why it's my belief that the short position held by Scotiabank is the only one that really matter in the non-U.S. bank category, as the rest are split up between many players, the way it should be in a free-market scenario.
(Click on image to enlarge)
As for gold, 4 U.S. banks are net LONG the gold market by 5.95 million ounces, an increase of 1.48 million ounces on the long side since the July report. My, how things have changed.
As far as the 20 non-U.S. banks are concerned, they are net SHORT the gold market by 2.20 million ounces. Once again, it's a good bet that Scotiabank also holds the lion's share of this amount as well, and if you divide up what's left between the other 19 non-U.S. banks, their positions become immaterial.
Here's Nick's BPR chart for gold. Also note the big jump in the short position of the non-U.S. bank category back in October of 2012 when Scotiabank was forced to come in out of the cold.
(Click on image to enlarge)
There has never, ever been such a dichotomy between U.S. and foreign banks. They are both on the same side in silver, but exactly the opposite in the gold market.
So, who is going to win this bet on gold, with JPMorgan Chase on one side, and every other bank on Planet Earth on the short side, including the other three U.S. banks?
*****
selected PM news and views....
Three King World News Blogs
1. Egon von Greyerz: "The World is Now on the Edge of a Massive Collapse". 2. Dr. Paul Craig Roberts: "Arrest the Gold Manipulators". 3.Gerald Celente: "Exclusive Sneak Peek at New Trends Journal and Gold".
South African gold output continues its decline – where will it end?
For South Africa, the latest figures from the country’s government statistical department, make fairly dismal reading, particularly with respect to its once word-dominant gold mining sector. The June figures, released yesterday, showed .that gold production continues to fall year on year – it was down 14% on that for June 2012 – and is now only the country’s fourth most important mined metal by value, having been overtaken by iron ore. Coal remains the most important metal or mineral by sales value, with platinum second, but the latter too is showing a year on year production decline.
For a resource economy like South Africa where metals and minerals account for a high proportion of GDP and export earnings, the decline in both volume and value has to be very disturbing – particularly as in the key PGM and gold sectors there looks to be no end in sight to the production falls while metal prices remain at current levels.
As I've said before in this space...South Africa is another rich country that insists on being poor. This must read commentary by Lawrence Williams was posted on the mineweb.com Internet site yesterday. I thank Ulrike Marx for her final contribution to today's column.
Russia Today's 'Prime Interest' highlights Bank of England's evasion of gold custody questions
Friday's "Prime Interest" program on the Russia Today television network interviewed GATA's secretary/treasurer about the Bank of England's refusal to explain the recent huge discrepancy in its reports of the gold it holds in custody, a refusal suggesting the bank's heavy involvement in the smashing of the gold price in April.
And then "Prime Interest" producer Justine Underhill described the sudden pounding of the gold price on August 5th just milliseconds before the official release of the Institute of Supply Management's report on U.S. service-sector companies.
The link to the rest of Chris Powell's commentary...plus the link to the TV interview...was posted on the gata.org Internet site yesterday.
Gold Collateral Situation: "It's Very Complicated"
Over the past month, gold prices have risen and fallen, but one thing has been constant - the situation surrounding gold as collateral has been consistently "complicated." We first noticed Gold Forward Offered Rates (GOFO)sliding below the X-axis on July 8, when 1 Month GOFO turned negative for the first month since the Lehman failure, while the 3 Month GOFO had a minus sign ahead of for the first time since the 1999 Washington Agreement (which allowed Gordon Brown to dispose of the UK's gold at blue light special prices).
However, what has been different about the current negative GOFO episode is that while in the past GOFO spiked negative and promptly reverted to normal, short-end GOFO rates (1-3 Month) have been negative now for the longest period on record: 25 consecutive work days. And it's only getting worse: after the 6 Month GOFO rate also slid below 0% in mid-July, only to recover positive for the next two weeks, as of today it has again turned negative for the second day in a row while the short-end procurement situation has gone from bad to worse.
What is unclear, is why GOFO rates continue to be negative (and are getting more negative). As we laid out over a month ago, it may be one of many things:
- An ETF-induced repricing of paper and physical gold
- Ongoing deliverable concerns and/or shortages involving one (JPM) or more Comex gold members.
- Liquidations in the paper gold market
- A shortage of physical gold for a non-bullion bank market participant
- A major fund unwinding a futures pair trade involving at least one gold leasing leg
- An ongoing bullion bank failure with or without an associated allocated gold bank "run"
- All of the above
One thing we do know that has changed since then, is that JPM's gold bullion holdings have slid to fresh record lows and JPM hasbeen forced to scramble to procure gold from both HSBC and Scotia. Is there anything else going on behind the scenes? Absolutely (coughbundesbankcough), alas as usually happens in cases like this, we will learn the whole story after the fact. That's ok: we have lots of popcorn, and unlike those who rely on the JPM vault for storage purposes, our physical holdings are always at arms length.
http://jessescrossroadscafe.blogspot.com/2013/08/gold-daily-and-silver-weekly-charts_9.html
Gold Daily and Silver Weekly Charts - Slouching Through August Delivery
There was intraday commentary on the gold inventory situation and Bullion Heading East here.
I doubt that we are in a normal market correction or even a bear market in the precious metals. It think that what we are seeing is tied intimately with the inability to repatriate Germany's sovereign gold from its custodial holders, without a seven year wait.
The drops in COMEX registered gold suggest higher prices and a trend change might be coming. I documented the latest big drop in inventory late last night here.
The German Federal Elections are coming next month on 22 September. Just in time for Oktoberfest! Zicke zacke, zicke zacke, hoi hoi hoi!
Peer Steinbrück, the Bundesministerium der Finanzen, or BMF, is running against Angela Merkel. I think we have a number of would be "BMF's" running around Wall Street, these past ten years.
Remember Herr Steinbrück? He has been in the café before, as we show in the old cartoon below, with some recent topical adjustments.
I wonder if the question of Germany's missing gold will be raised.
Let's see what happens. Only fifteen or so days of August delivery to go, excluding weekends.
Speaking of which, have a pleasant weekend. See you Sunday evening.
09 AUGUST 2013
GLD Shares, COMEX, And Bullion Heading East
I looked over the blog's argument, and after subtracting much detail that while technically correct was extraneous to the proposition, came to the conclusion that the basis for the argument was that if one is simply looking at bullion levels in the COMEX and maybe GLD, you could point to the fact that they were increasing while the price of gold was rising, and are decreasing now while price is decreasing. QED.
The problem I have with this argument is that if it were true, if the disgorgement of gold from GLD and the COMEX was just a result of investor disenchantment, then the market should be awash in cheap physical gold.
Unlike debt paper assets, physical gold does not simply disappear when it is liquidated. You may see some paper gold evanesce as leverage is unwound, since it really has no substance of its own, and is merely a rehypothecation of many claims on the same physical bullion. But actual metal has to go somewhere.
This is why the evidence of scarcity of bullion in the markets in Asia and the Middle East has been so important. And also the change to net buying, instead of steady selling, of gold bullion by the central banks, which is a phenomenon very new, relatively speaking. Indeed it is something we have not seen in over twenty years.
And this is why the leasing of gold for temporary use and even outright selling is important, and therefore the negative GOFO rates, as they point to the scarcity for near term delivery of gold and possible imbalances in longer term obligations. And of long lead times on retail purchases, and large delivery flows on other exchanges that are not largely paper markets like the COMEX.
And the absolutely incredible fact that a request for the return of Germany's sovereign gold from the custody of the Fed was flatly denied, and put off for seven years. If gold is in such disfavor that tonnes of it are being abandoned as a consequence by the market, why can't Germany have its gold back?
People who only watch a few familiar metrics and draw conclusions from them may be experts in them, and they may be right. But in times of dramatic sea change, it often pays to cast one's eye across the broader horizon, towards foreign shores, to see if the receding of the ocean is something more significant than the simple ebbing of the tide.
Now, one might wonder, could the funds and the bullion banks in the gold market, who must surely be aware of what is happening behind the fog of their opacity, act in such a short sighted manner as to ship the gold east to be melted down and held closely in the vaults of strong hands, and in the private caches of the many, not likely to return? And yet still continue on in their game of leveraged ownership and price rigging? Is this not a recipe for a future disaster?
Is there any doubt, after all that we have seen in the past ten years, that betting on the foolish and often destructive greed of the Anglo-American bankers offers something less than long odds?
You are right, we don't know what is happening with certainty. I surely do not. And this is why we must try to keep looking for some alternative explanations and additional data. But one has to sort this puzzle out with all the available data, and not just from a few sources, especially those under the management of the same old group of Bankers and Traders.
The best way to address this is not to dismiss or even ridicule those who are seeking information and asking some very good questions. The most effective response is increased transparency and disclosure of data that is often unnecessarily hidden from public view so that the powerful can gouge a few more easy dollars from them by manipulating information and gaming the system.
It is the inability of money to flow freely without undue fees, distortions, and interference, and the commensurate problem of assessing risk, that is at the heart of the inability of our unreformed system to recover.
Unfortunately that difficulty in measuring risk is in the nature of an economy that has become founded in secrecy and an undue concentration of power, governed by foolish people whose primary concern is their own personal greed, almost to the point of madness, and to hell with the consequences. And if something should go wrong, well, the public is there to take the burden for them.
Weighed, and found wanting.
Stand and deliver.
"GLD Is Collapsing Its Shares And That Gold Is Being Shipped Directly To Asia"
By Tekoa Da Silver
August 9, 2013
I had the chance to reconnect with a source in the bullion management business, whose operations deal on a direct basis with the shipping desks at the GLD. While remaining unnamed at this time, it was a powerful conversation, and he was quite liberal in sharing thought.
Speaking to what his group is hearing from the main GLD custodian [HSBC], he noted that, “GLD is collapsing in [terms of] the number of share issuance, and [is] being redeemed…we are hearing from my end…that the GLD main custodian has been collapsing it and redeeming it, and that gold is just being shipped via their shipping desk directly to Asia.”
He further added that, “It is quite clearly a major establishment using their shipping desk to ship gold bullion, and potentially having it re-smelted down in Singapore, Hong Kong, etc. It (the gold) is moving.”
When asked his thoughts on the potential for a short-squeeze down the road as all this gold moves east, he concluded by saying, “Anything that can go down as hard as [gold] has, can obviously have a dramatic short squeeze at some time…at the end of this market [I expect] you will have a ridiculous squeeze.”
While much is left unanswered in the public domain regarding this year’s mysterious clearing out of physical gold from Comex warehouses, it would make sense for such events to occur right before a massive run-up in price—whether it be through freely traded markets or by governmental decree...
Read the entire article here.
Related:
GLD May Be in the Eye of the Gathering Storm.
Tonnes of Gold Removed From the COMEX and Major ETFs Since January 1
Stand and Deliver: How Germany Disrupted the World's Gold Market
Former Treasury official Roberts marvels at claims to imaginary gold
Submitted by cpowell on Fri, 2013-08-09 20:54. Section: Daily Dispatches
4:50p ET Friday, August 9, 2013
Dear Friend of GATA and Gold:
Interviewed by King World News today, former Assistant U.S. Treasury Secretary Paul Craig Roberts marvels at the perversion of ordinary markets by derivatives and particularly the explosion of paper claims on gold that doesn't exist.
"What this shows," Roberts says, "is the consequence of repealing the position limits on speculation, because you now have a situation where derivatives drive the actual physical market. This is the exact opposite of what sound economics would have. ... At some point even the people gambling in this market have got to see this can't continue to work. I don’t really understand how it's gone on this long, and I don't see how it can continue, particularly when the paper claims so vastly exceed the actual supply."
An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Banks trying to block gold withdrawals, von Greyerz says
Submitted by cpowell on Fri, 2013-08-09 18:08. Section: Daily Dispatches
2:04p ET Friday, August 9, 2013
Dear Friend of GATA and Gold:
Swiss gold fund manager Egon von Greyerz tells King World News today that Swiss banks are obstructing their clients trying to remove gold to private vaults. Von Greyerz adds that gold's downtrend is over and its uptrend will accelerate soon. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Bullion dealer says Comex and ETF gold is being recast for Asia
Submitted by cpowell on Fri, 2013-08-09 12:06. Section: Daily Dispatches
8a ET Friday, August 9, 2013
Dear Friend of GATA and Gold:
Bill Haynes, president of coin and bullion dealer CMI Gold and Silver in Phoenix, tells King World News that North American refineries are recasting gold from Comex warehouses and exchange-traded funds into forms popular in Asia and shipping the metal there as gold generally moves from the West to the East. Haynes' commentary is posted at King World News here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
RT's 'Prime Interest' highlights Bank of England's evasion of gold custody questions
Submitted by cpowell on Fri, 2013-08-09 00:04. Section: Daily Dispatches
8p ET Thursday, August 8, 2013
Dear Friend of GATA and Gold:
Today's "Prime Interest" program on the Russia Today television network interviewed your secretary/treasurer about the Bank of England's refusal to explain the recent huge discrepancy in its reports of the gold it holds in custody, a refusal suggesting the bank's heavy involvement in the smashing of the gold price in April. (See http://www.gata.org/node/12859.)
And then "Prime Interest" producer Justine Underhill described the sudden pounding of the gold price on August 5 just milliseconds before the official release of the Institute of Supply Management's report on U.S. service-sector companies. (Seehttp://www.gata.org/node/12888.)
The gold segment came at the opening of today's "Prime Interest" program and it's posted at YouTube here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
http://www.silverdoctors.com/ted-butler-jpm-is-cornering-the-gold-market/#more-30347
By Ted Butler:
Today I would like to step back a bit and highlight how we got to the outrageous position of JPMorgan cornering the gold market. Regular readers know that I have pinpointed JPMorgan as being the prime manipulator in gold and silver for going on five years, following the revelation from the federal commodities regulator, the CFTC, that JPMorgan inherited the massive concentrated gold and silver short positions of Bear Stearns in March 2008. That, plus verifiable data from the CFTC, in its published Commitments of Traders (COT) and Bank Participation Reports, clearly confirm my allegations of a market corner by JPMorgan in COMEX gold futures.
This may seem hard to believe, but JPMorgan’s current corner on the COMEX gold market is the second market corner in the gold market by this bank in the last nine months and among many prior corners over the past five years in gold and silver. JPMorgan is a serial market manipulator and now swings both ways in cornering markets; usually on the short side of markets until the current long corner in gold.
Based upon COT and Bank Participation Reports data, last December 4, JPMorgan had a net short position in COMEX gold futures of approximately 75,000 contracts. This position represented 20.5% of the true net open interest on that date (once 68,648 spread contracts were removed from total open interest of 434,416 contracts). On that date, the price of gold was $1700. While it is difficult for many (including the CFTC) to grasp the concept that a corner could exist on the short side of the market, surely no one would argue against a 20.5% concentrated share of a major regulated futures market by a single entity would constitute manipulation and a corner.
It was this corner on the short side of COMEX gold futures by JPMorgan that provided the incentive and led to the subsequent $500 decline in the price of gold into the end of June. On the historic price decline in gold over the first half of 2013, JPMorgan booked profits on their short side gold market corner (of over $2 billion in my estimate) and continued to rig prices lower in order to establish their current long side corner of 85,000 contracts, or 25% of the true net open interest in COMEX gold futures (minus spreads).
You can’t go from being 75,000 contracts (7.5 million oz) net short to 85,000 contracts (8.5 million oz) net long in an instant or in a week or a month. You can’t snap your fingers and buy the equivalent of 16 million oz of gold, regardless of whether you have the money to leverage derivatives with a notional value of $25 billion. It took JPMorgan nine months to buy 160,000 net COMEX gold futures contracts (16 million oz), at an average monthly rate of around 18,000 contracts (1.8 million oz) from Dec 4 thru today.
In a nutshell, a market corner is determined by the size of the position of the corner relative to the total market. In hundreds of previous articles I used the term concentration; but it seems to me that corner is a better description. What percent of a market is large enough to constitute a corner? Like pornography, a reasonable person should recognize it when he sees it. A good place to start is by comparing a concentrated holding relative to other markets, relative to the same market historically, relative to regulatory guidelines and relative to commonsense.
Large and active regulated futures markets (with several hundred thousand contracts of open interest or more), like COMEX gold, NYMEX crude oil, CBOT corn or CME e-mini S&P futures should have relatively low levels of concentration on either the long or short side, say below 20% and closer to 10% by either the 4 largest shorts or longs. Among such large markets, only COMEX gold futures is above all the others with a long side concentration three times larger than for corn or crude oil. On an historical basis, the current concentration on the long side of COMEX gold by the four largest traders has never been higher than it is now, either in gold or in any other comparable large market.
Even though the largest concentrated gold long trader, JPMorgan, succeeded in derailing the imposition of speculative position limits (the one known cure for a market corner), we have a firm sense for what the CFTC intended as the maximum percentage of the market to be held by any one entity. The agency’s proposed formula called for a 2.5% to 3% effective limit on what any one trader held in large futures markets before it was overturned in court. Therefore, JPMorgan is holding a concentrated position in COMEX gold futures ten times or more larger than the proposed limits of the CFTC.
Since the names of individual traders are not given in COT or Bank Participation Report data, it could be argued that JPMorgan is not the bank holding a corner in COMEX gold. That matters little because someone holds the corner. The four largest traders are holding nearly 42% of the COMEX gold futures market on a true net basis (after spreads are removed). Even if you assumed an equal division of the 42% true net market share by the four largest traders, at more than 10% each, the individual positions would still constitute a corner on their own. It would also involve an obvious conspiracy among these holders since the positions were established simultaneously. Besides, if it’s not JPM holding a 25% share, then JPM management has to be considered irresponsible to its shareholders for allowing the manipulation allegations against the bank to go unchallenged.
And one last thing – the fact that JPMorgan swung from a short side corner in COMEX gold in December to a long side corner now, it puts a lie to all the stories that the bank is only hedging for clients. What possible hedging would call for a short corner on the market being reversed to a long side corner in nine months?
Market corners are very big deals and it is for good reason that they serve as historical mile markers. In many ways, the current COMEX gold corner shares obvious similarities with past market corners in terms of the existence of a controlling market share, but it is the differences that make the current gold corner very special. For one thing, all previous market corners had ended or were ending before the world even knew there was a corner in effect. As far as public awareness, all previous market corners had to be reconstructed after the fact. Here, we have a ringside seat (unless my analysis is completely off) on a market corner that is unfolding in front of us in real time. This is unique beyond imagination.
What is also very different about JPMorgan’s current gold market corner is that it is visible and provable in the CFTC’s own published data. To my knowledge, COT reports didn’t exist at the time of the Hunt Bros silver manipulation and the Sumitomo copper manipulation mostly involved trading on the LME, not the COMEX. The current gold corner by JPMorgan is not being discussed because of leaks from insiders, but from US Government data. Let’s face it – it’s not possible for me to be more of an outsider.
Past market corners pitted the regulators against outside speculators or rogue traders. I don’t recall any previous market corners being resolved where the industry insiders and particularly the exchanges were at odds with the CFTC. It was usually the regulators, the exchanges and the industry insiders all on one side and those accused of the corner (like the Hunt Bros) on the other side. In the current gold market corner by JPMorgan, the COMEX (owned by the CME Group) is just as much at fault for allowing it to develop. Were the CFTC to move against JPM, it would result in a decidedly different matchup than seen historically.
There can be no question that the price pattern over the past nine months has benefitted JPMorgan immensely. A short corner on the gold market at $1700 and now a long corner many of hundreds of dollars lower. Just a coincidence or strong supporting evidence of manipulation? Either JPM is the luckiest trading entity in history or they are exerting undue control on the gold (and silver market). Establishing repeated market corners has never occurred in history, yet the data prove that JPMorgan has done just that.
Not lucky at all are the victims of JPMorgan’s repeated market corners. The victims of the successful short side corner in gold are centered on those in the gold mining industry; shareholders and employees and anyone else damaged by the deliberate price-rigging to the downside, including metal investors and states and countries dependent on tax revenue. So many damaged with benefit to so few.
A key question is why the CFTC is not reacting to the clear evidence of JPMorgan cornering the COMEX gold futures market. One explanation (that I’ve long favored) is that the agency doesn’t know how to interpret the data they are publishing. But I’m giving them paint-by-the-numbers instruction for interpreting their own data. The Commission has published data that show that the largest four traders hold 140,550 gold contracts net long and that represents 42% of the entire open interest once all spread contracts are subtracted from total open interest. The agency can confirm in a heartbeat if the largest single trader holds close to 85,000 contracts of that total in the latest COT report and whether the largest short held 75,000 contracts on Dec 4. The agency can’t reveal the identity of the trader (unless it charges a violation of the law), but it can verify or dispute the share of the market held by the largest gold long without naming the entity.
Since the explanation that the CFTC can’t correctly interpret their own data loses credence after basic instructions to them of how to do so, we are left with the more popular explanation that the agency is in cahoots with JPMorgan in some way. As a US citizen, I hope that’s not the case, although I am increasingly leaning that way. One thing that can’t be denied is that the overall tide of sentiment against big banks trading in commodities is rising. I don’t know why it has taken so long as it never made sense for banks backed by insured deposits to speculate in commodities. I’m encouraged by Commissioner Bart Chilton’s recent pronouncement to this effecthttp://www.bloomberg.com/news/2013-08-05/fed-should-reverse-commodity-trading-policy-cftc-s-chilton-says.html but disappointed that he ignored the short corner on the gold market in December and ignores the long corner now in place. It’s time to be specific and not speak in generalities.
Perhaps the reason that the CFTC can’t see the corner in place in COMEX gold is because they are not looking. I confess; since JPMorgan turns up so often as the gold and silver price controller, I look for their involvement. I can tell you this for sure; if you look at the data through the perspective that JPMorgan is up to no good, then you can see it clearly. This reminds me of my discovery of the silver manipulation in the mid-1980’s thanks to Izzy Friedman’s challenge to explain the low silver price amidst a supply deficit. I came to see the short side manipulation and concentrated position because I was looking for what was wrong. Same here – if you try to legitimately explain why JPMorgan was so short at the top in December and so long now after a $500 decline in legitimate terms, you’ll drive yourself mad. This is a rotten crooked bank and their actions can only be comprehended in illegal terms.
Since we are in the unprecedented position of looking at a corner in the gold market in real time with little history to guide us, no one can predict how it will end precisely; but end it will. Will it end to the upside, with JPMorgan realizing huge profits (as they did with their previous short gold corner); or will it end with JPMorgan being forced to divest of their gold corner by the regulators. Obviously, the record would suggest the former, but it’s not impossible for the regulators at the CFTC to awaken from their coma of failing to properly regulate precious metals. Certainly how JPMorgan liquidates their gold corner will be the prime influence on the gold price.
Regardless of how JPMorgan disposes and dissolves its gold corner on the COMEX, it should be good for silver. If JPM lets the gold price rip to the upside for great profit (as is most likely), I would expect silver to more than tag along for the ride. If the regulators gain some wisdom about their own data and some fortitude in going against JPMorgan’s gold corner, I don’t see the great danger for silver at current prices. After all, JPMorgan has no long side corner in silver to be ordered liquidated and we’re already below the cost of production for many silver miners.
I’m not sure what to root for. If JPMorgan is forced to divest its corner on the gold market that would be such a regulatory sea change that it would make it extremely unlikely that JPM would short aggressively on the next silver rally. I am still convinced that is the most important market consideration. A measured reading of the facts and circumstances suggests the gold corner could be the catalyst for my long-expected divorce between silver and gold prices. Make no mistake – this gold market corner seems almost from another world or time. If I didn’t see the clear evidence that it existed by virtue of the hard data, I’d swear it was impossible. Instead, we’re all going to witness how it gets resolved.
Ted Butler
C.O.T......large speculators closed out lots of shorts , while Commercials went short ... Hmmmm ! Large increae in the bank participation for gold from July to August as well !
Gold COT Report - Futures
| ||||||
Large Speculators
|
Commercial
|
Total
| ||||
Long
|
Short
|
Spreading
|
Long
|
Short
|
Long
|
Short
|
153,812
|
102,177
|
18,480
|
187,636
|
241,795
|
359,928
|
362,452
|
Change from Prior Reporting Period
| ||||||
-707
|
-23,976
|
-1,361
|
-1,196
|
27,189
|
-3,264
|
1,852
|
Traders
| ||||||
107
|
98
|
65
|
54
|
59
|
196
|
190
|
Small Speculators
| ||||||
Long
|
Short
|
Open Interest
| ||||
36,134
|
33,610
|
396,062
| ||||
2,291
|
-2,825
|
-973
| ||||
non reportable positions
|
Change from the previous reporting period
| |||||
COT Gold Report - Positions as of
|
Tuesday, August 06, 2013
| |||||
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