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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.
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