Manipulators Of Gold Now May Not Be Who You Think

BagOverHead

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About a fifth of a second before the ho-hum jobs report, market manipulators triggered heavy indiscriminate short selling of Comex gold futures to “set the tone” and ensure today’s blast of liquidity by the Fed veered away from precious metals. With positioning already extreme and bullish going into the latest Friday sell off, one might think the Boyz walked into a dungeon and locked the door behind them.

Chart Source: Nanex/Zero Hedge

Normally, “gold bugs” would cast JP Morgan as the chief culprit for this kind of gaming.  JPM’s Comex gold depository holdings have been running on fumes, especially of late, and it needs to produce physical gold to issue and soon. I’ve written about this at length in recent posts.

Although we were getting hints about commercial positioning, now comes specifics – a stunning game-changer as the CFTC releases fresh data on bank participation! Under the category “U.S. Banks” are the following figures on positions: 56,751 long and 27,129 short totals 29,622 net contracts, or long 2,966,220 ounces. This is as of June 4 when POG was at $1,399. On May 7, with POG at $1,452, U.S. Banks had a net short position of 1.678 million ounces.

Wider angle view of this development:

At the beginning of the year the position was 8 million ounces in gold shorts. The Bullion Bankster Boyz have moved fast, fully taking advantage of the smash in gold — not only covering a huge short, but taking on a solid long. As the chart below shows, this is unprecedented since the CFTC began creating these reports. And who knows how much physical gold the active banks in this trade have looted from GLD. Very slick (and sick). I have to hand it to them.

Chart Source: GotGoldReport

The names of the banks included in the CFTC report are not revealed, but we can figure it out by looking at another report issued by the Treasury. The Bank Derivatives Activities Report compiled by the Office of the Comptroller of the Currency lists by name the top five banks that own the most OTC derivatives in the category of gold.

Two banks — JP Morgan and HSBC — completely dominate at about 85%. But the big player is  primarily JPM. I’m not sure if HSBC is listed in the CFTC under its U.S. bank charter or as a British holding company. Goldman Sachs could be in there as they are more inclined to make directional bets than anybody.

If JPM no longer has a motive to be a big manipulator, then who is continually gaming gold futures? The CFTC offers a clue. Its report shows non-U.S. banks were 24,035 long, 49,075 short, 25,400 net, or short 2, 540,000 ounces. The biggest non-US gold derivative player is Deutsche Bank [See Zero Hedge: "Presenting the World's Largest Derivative Player"] and HSBC.  Ted Butler and Ed Steer think that this short is Bank of Nova Scotia.  Still, this position — going up against JPM on the other side of the trade — might not be where Barclays, Golden Sachs, HSBC, Deutsche Bank, Scotia, or Societe Generale truly wish to be.

That leaves speculation that this is the handiwork of some large hyper-leveraged rogue hedge fund, a whale. There’s precedent for this. Hedge funds could be used as foils or set-ups for squeezes by big bullion banksters.

The gold Commitment of Traders data on Tuesday essentially had the same bullish profile as the week before [CoT Positions Most Bullish in a Decade]. Notably, there was a large reduction of 46,500 open interest contracts by the commercials. It confirms that the aforementioned U.S. banks are bullishly positioned and scaled down on the gold trade. Overall open interest contracts dropped from 411,001 to 373,061.

The CFTC shows U.S. banks still short silver, but here the CoT data has gotten even more bullish, even before Friday’s attack. Swap dealers are quite long silver. Managed money is nearly completely out, with only 1,934 contracts long.

Visitors, a subscription to WinterActionables.com is only $35 a quarter. If you are exploiting the current once-in-a-generation opportunities in precious metal stocks like I am, less than $12 a month is a bargain to have keen eyes on this sector, which is being absolutely neglected and barely followed. Previous write ups on my investment selections may be found by searching WinterActionables.com. Among my previous posts, you’ll find a few freebies but most require a subscription to access.

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  • RGlenCheek

    All the markets are rigged right now. The best monetary strategy is DO NOT PLAY.

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  • http://www.winteractionables.com/ Russ Winter

    Rather heated discussion going on at GotGoldReport that I’ve jumped in on. I think Gene Arenberg has some interesting color on this. I think “Kid Dynamite” is an stooge, and possibly even a pyscho-op but you can see another perspective of sorts there. .

    http://www.gotgoldreport.com/2013/06/gold-and-silver-disaggregated-cot-report-dcot-for-june-7.html#comments

  • http://www.winteractionables.com/ Russ Winter

    And finally Harvey Organ on the JP Morgan house account at the Comex. It would seem given the new CFTC data that JPM could replenish.
    http://harveyorgan.blogspot.com/

    HO: Now for JPMorgan’s dealer side and what the inventory should be:

    Tuesday night we reported that 4935 contracts have been issued by JPMorgan’s house account since first day notice and not yet subtracted out of inventory

    You will also recall on Saturday and Monday night, I reported that JPMorgan had 470,322.102 oz in it’s dealer account. From that day until now, 58,795.82 oz was either withdrawn or adjusted out, leaving the dealer side Thursday and Friday night at 413,526.284 oz

    On the dealer side Thursday we had 10 notices issued on JPMorgan’s dealer account
    On Friday: zero

    Thus, 4945 contracts have been issued so far for 494,500 oz and these
    ounces have yet to settle from JPMorgan’s dealer side.

    JPMorgan’s dealer vault registers tonight 413,526.284 oz

    Somehow we have a huge negative balance as i) the gold has not left JPMorgan’s dealer account and has yet to settle.

  • http://www.winteractionables.com/ Russ Winter

    And Ted Butler weighs in:

    “Since the BPR of February 5, the US bank category position (in effect, almost exclusively JPMorgan) has swung by a net 100,000 contracts, from net short 70,000 contracts to net long 30,000 contracts (all rounded). There has never been a move of such magnitude before. Over that same time, the total net commercial short position (in the COT) declined by 113,000 contracts, meaning that JPMorgan accounted for almost 90% of the entire commercial decline. It is not possible for that extreme degree of concentration and market share not to be manipulation, pure and simple.

    And here’s the manipulative icing on the cake – JPMorgan was able to flip a net short position in COMEX gold of 50,000 contracts in February to a net long position of 50,000 contracts on a gold price decline of as much as $350. I would submit that the singular purchase of 10 million ounces of gold (worth the equivalent of $15 billion) within four months on a greater than 20% price decline could only be accomplished if the price was manipulated lower by the purchaser. No other explanation would be possible…

    JPMorgan’s emergence as the big COMEX gold long changes the dynamic of the gold market. In addition to conclusively proving that this is the most crooked and evil financial institution ever to exist, it confirms the extremely bullish set up for the gold price…

    Of course, if JPMorgan can continue to accumulate inventory on lower prices, we will get lower prices temporarily. But having JPMorgan confirmed as being on the long side of gold is a game changer. That’s why I continue to throw money out the window on silver call options.”

  • http://www.winteractionables.com/ Russ Winter

    More speculation on the CFTC, this time from Gene Arenberg:

    Notice that I rarely mention JP Morgan. I think JPM is the “steady eddie” of the futures world, running an efficient bullion management business across multiple markets. But they are not the only US Bank that reports to the CFTC. See above for the more mercenary kind that doesn’t mind taking a one way bet from time to time, and then publicly advising clients to short gold once they had their positions in place. In fact, they are more or less famous (infamous?) for doing just that and even taking the other side of some of the products they have sold to their muppet clients. (Hint. A former exec with that bank now runs the CFTC. If that bank is a bona fide hedger, and it almost certainly is, then with the CFTC’s current leadership they likely do not have to worry about things like position limits and excess or overzealous regulator scrutiny.)

    While some have their sights on one bank and have built a cottage industry demonizing them, personally I think they have the right “crime*,” but the wrong suspect. But what do I know? :))

    *(That is if one believes that attempting to run stops and manhandle the markets over short timeframes is a crime and not just the way futures markets have been since inception. Most likely markets won’t break down (or break out) unless they are otherwise ready to do so, is my view. At the end of the day what we are trying to do is guesstimate when the current impulse and momentum is near its inevitable turning point.)

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  • http://www.winteractionables.com/ Russ Winter

    It increasingly looks like the JPM theory laid out by Ted Butler three weeks ago is correct.

    http://silverdoctors.com/ted-butler-blockbuster-in-gold-as-jp-morgan-likely-acquired-10-m-oz-of-gold-liquidated-by-gld/

  • http://www.winteractionables.com/ Russ Winter

    Ed Steer this AM on the CFTC:
    http://www.caseyresearch.com/gsd

    What the June Bank Participation Report shows was that ’3 or less’ U.S. bullion banksare now net long the gold market to the tune of 29,622 contracts [2.96 million ounces]. The May report showed these same three U.S. banks were net short the Comex futures market in gold by 16,610 contracts [1.66 million ounces]. That’s a change of 46,232 Comex gold contracts in less than a month!

    Also in gold, there were 21 non-U.S. banks that were net short 25,040 Comex gold contracts [2.54m oz] between them. That’s an increase from the 22,474 Comex gold contracts [2.25m oz] they held short in the May report. Once again, the lion’s share of that 25,040 contracts I believe to be held by Canada’s Bank of Nova Scotia. And if you divide up what remains between the other 20 non-U.S. banks that hold short positions in the Comex future market, you’ll see at a glance that their short positions are immaterial in the grand scheme of things.

  • http://www.winteractionables.com/ Russ Winter

    Aaron Krowne e mails me this:

    Ed Steer and Ted Butler think the big foreign bank that is still short is Scotia-Moccata. There’s a lot of history suggesting this bank (and its corporate forebears) were involved in precious metals manipulation at the behest of government interests.

  • http://www.winteractionables.com/ Russ Winter

    Longer term view of the silver set up.

    http://img811.imageshack.us/img811/5462/screenshotunl.png

  • http://www.winteractionables.com/ Russ Winter

    Chart showing rapid drop on open interest on the Comex:

    http://img203.imageshack.us/img203/9898/screenshotioh.png

  • crimson

    The very poor action in silver should concern PM bulls. Has a major gold advance ever commenced with silver lagging so badly?

    • PeaknikMicki

      Wonder if the freegolders are on to something.
      Another, FOA, FOFOA and even Jim Sinclair have been suggesting Silver isn’t going to perform to full potential in this bull market.

      The large open interest in Silver is most interesting though. Wonder if there could be a black swan at some point. I think holding a position in physical silver is worth the chance.
      ..PeaknikMicki

  • crimson

    Wonder why the gold shorts never fail to aggressively support their positions, while often this is not the case for the gold longs — apperently now including some banks. Friday was a perfect example. Why did the longs allow the shorts to eat them for breakfast?

    • http://www.winteractionables.com/ Russ Winter

      I have followed these blowoffs or bottoms before, and often the commercials just take some licks to accumulate even more. During the blowoff in ags last year the commercials were short for several months, while prices ground higher. They kept putting in the hook, and finally those markets gave way. But seeing bullion banksters long gold is one for the ages. You use of the words “some banks” is an understatement.