Tag Archives: bullion banks

Overnight Paper Attack On Gold – Why This One Was Different

Once again there was an overnight “flash crash” in Comex gold futures trading.  This time it occurred at 3:56 a.m. EST at one of the quietest trading periods of the roughly 23 hour electronic trading day.  India has gone sleep. The Shanghai Gold Exchange has been closed for about 90 minutes and the London markets are just beginning to function.  I guess someone decided it was a good time to unload close $500 million worth of paper gold into the Comex’s Globex electronic trading system (click to enlarge):

The graph above is the Comex August paper gold derivative, sometimes referenced as a “contract.” The $500mm million number is from Zerohedge and likely includes all the contract months. At exactly 3:56 EST a clearly motivated seller decided it was the best time to unload 2,741 August pieces of paper gold, driving the market down $4.50 instantaneously. If the gold were actually physically delivered into the buyer, that chunk would be 274,100 ozs, or roughly $360mm worth of gold. It’s doubtful that amount of gold is actually sitting in the Comex “registered” vaults (yes, I know what is allegedly reported to be in the vaults).

INTERESTINGLY, the very next minute, some entity BOUGHT 2,373 August paper gold contracts, nearly offsetting the amount of contracts sold. That’s why the price snapped right back up. Also interesting is the fact that the apologists on behalf of those manipulating the paper gold market were dead silent as to the source of this large sell – i.e. there were not any reported “fat finger” excuses.

The question I have is whether or not the flash crash sale was perpetrated to induce the hedge fund black algos to mechanically sell, assuming stop-losses were triggered, to enable the buyer to buy 2,373 contracts at a lower price. We know for sure, based on the recent COT reports, that the bullion banks are feverishly covering their short position, with the bank swap dealers now net long gold. Concomitantly, we know the hedge funds are dumping longs and going short.

Unfortunately, whoever decided to implement this operation strategically executed it one day AFTER the reporting cut-off date for Friday’s COT report. It’s a neat little maneuver the bullion banks have doing for years as a method of covering up their “tracks in the snow.” It will be impossible to analyze what occurred overnight when the COT report a week from Friday is released. The “winds” will have blown snow over the tracks.

That said, it certainly feels like there’s real buyers of gold and silver accumulating positions at these levels.  I know from looking at the data on a daily basis that the Indians are actively importing gold  currently.  For  now, it looks like the General Sales Tax “boogieman” was a non-event.  China is actively buying, albeit it’s somewhat seasonally slow on the SGE.

What is of interest, at least to me, is the fact that the market has a bullish tone in what is normally one of the slowest seasonal periods of the year.  In another month the Indians will be gearing up for their peak buying period.   Also of note is that fact that U.S. retail coin buyers have ramped up their appetite considerably for silver eagles and, more of note, for some reason India is importing silver right now in unusually large quantities.   I have not been able to track down a link yet, but yesterday Reuters referenced an article in the Economic Times hard copy edition titled, “Silver Imports May See Three-Fold Rise as Low Price Drives Demand.”

Silver Remains The Cheapest Investment On Earth

As discussed earlier, today’s price-action in the paper Comex gold market is nothing that a reflection of the Fed’s desperate attempt to keep the price of gold from breaking out above $1300.   The reason for this is that a break-out above $1300 would trigger a lot of computer-generated buying and likely catapult gold in the $1500’s rather quickly.   If you notice, since the end of April the Fed has slammed gold as it traded above $1290.  $1300 was rejected on May 2nd and 3rd.  It’s similar to when gold was punching on the ceilings set at $400, $500, $600 etc back in the mid-2000’s.

Silver is a much smaller market and is used for more than just a currency and wealth preservation asset.  Depending on the relative strength of the economy, up 70% of all silver is used for industrial applications.  At the margin, a small incremental shift in the demand curve for investment silver has the potential to bury the issuers of uncovered paper silver (Comex futures, OTC derivatives, LBMA forwards, etc).

When the Fed/ECB/BOE/BIS loses control of the precious metals derivatives markets – an event which could easily occur this year – silver’s rate of appreciation will stun most observers/commentators.   The SGT Report invited me on its podcast show to discuss the precious metals market and the insidious corruption that has engulfed the U.S. system.

You can subscribe to the Mining Stock Journal using this link – new subscribers will receive all of the back-issues (March 4, 2016 debut):   MINING STOCK JOURNAL

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The Comex Is A Zombie Market: Hedge Funds Record Short Paper Gold

Gold didn’t “hit a low,” it was driven down by the bullion banks who are agents of the Fed, acting on the Fed’s orders…the price of gold is not determined in the market in which gold actually gets bought and sold, it’s determined in a paper futures market in which the contracts are settled in cash.  – Paul Craig Roberts on King World News

The Comex is like a grade-B horror movie – night of the living dead.   Zombies that wreak havoc on society but can’t be destroyed.  The Comex is the consummate symbol of the United States.  It embodies extreme fraud, corruption, wealth theft, market manipulation, regulatory capture, etc.  It is the ultimate manifestation of the end of Rule of Law in this country.

Last week the “managed money” hedge fund segment of the Comex took on a record net short position in Comex paper gold.  As reported to the CFTC from the CME bullion bank trading reports, hedge funds are now net short over 16,000 contracts representing over 1.6 million ozs of paper gold – over 46 tons. Conversely, the “swap dealer” segment – otherwise known as the bullion banks – have assumed a record net long position of 29.5k paper gold contracts.

Now, assuming we accept the COT report prima facie – and this can be a problematic assumption considering that the data originates from the highly corrupted bullion banks – whenever the hedge fund trader class net position has reached an extreme level in either direction, and the banks take the other side of that position, the price of gold has always eventually moved inversely to the hedge fund positioning.

Meanwhile, the amount of gold that has been declared to be available for delivery into contracts standing for delivery has diminished down to 138k ozs as of last Friday.  Against the net short of the hedge funds, this implies that the hedge funds are short 11.5 ozs of paper gold for every ounce of real gold made available for delivery.  If this ratio of paper to the real underlying commodity developed in any other commodity market the CFTC would step in an enforce the laws enacted to prevent this type of market manipulation.

The reason I now reference the Comex as a “Night of the Living Dead” zombie market is because this trading pattern between the bullion banks and the hedge funds has been in repetition since at least the time I began my involvement in the precious metals market nearly 15 years ago.  It never received the kind of attention it gets now until after the big smash started in 2011.  By then it was too late because the CFTC, SEC, Justice Department and Oval Office advisory staff had been stuffed with Wall Street’s emissaries, primarily of the Goldman Sachs and JP Morgan variety.  It’s Wall Street’s version of using pedophiles to supervise the daycare school.

Based on history, it would appear that the hedge fund/swap dealer net position is indicating that the price of gold may be in for a wild ride higher at some point.  But don’t expect this to happen immediately.  I expect the hedge funds to get aggressive in trying to push the price of gold lower in order to “harvest” their short position.   I mentioned to colleagues last week that this would explain the erratic, volatile intra-day moves in the price of gold we started to see recently.

Today is a good example, as gold traded up overnight – in the Asian physical markets referenced at the top by Dr. Roberts – only to be smashed just before data was released showing a collapse in U.S. manufacturing – data that should have been bullish for gold. However, if you want to trade on the side of the Government insiders – the bullion banks – now is a good time to buy the price smacks and sell the ensuing push higher.  At some point the banks will decide to fleece the hedge funds once again and take the price of gold higher, forcing the hedge fund black boxes to cover their shorts.

Wash, rinse, repeat.  You may ask yourself, how do you kill a zombie?  As a market for the trading of physical gold and silver, the Comex is already dead.  At some point, the entities who have stuck around to try their hand in the rigged paper game will either go broke or simply fade away.  At that point, the bullion banks will be left to play only with themselves. I suspect, however, at that point the U.S. economic, financial and political system will be in outright collapse.

Is Gold Now Set-Up For A Move Higher?

There’s just too many loud voices – plus self-promoting self-aggrandizers like Harry Dent – screaming for $800 gold.  Last time Goldman came out with an $800 gold target, gold ran from $1100 up to $1400.    Will these carnival barkers be right this time around?  I don’t know.  As Bernanke famously said, the Fed (banks) have new technology that enables them to create electronic dollars (Comex paper contracts) in unlimited quantities in order to direct the market in the direction of their command.

Of course, we all are left wondering why Bernanke ended his Fed chairmanship a few terms earlier than he needed to and decided to not stick around to face the consequences of his actions while he was pressing the print button on his keypad.

But I digress.  As for $800 gold?  It might have to wait.  The bullion banks have quietly shifted their trading book to a net long position.   And, in wash-rinse-repeat fashion, the hedge funds and the small retail traders have taking the other side of this and have gone net short Comex gold – significantly net short Comex gold:  (click image to enlarge)

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It is very rare for the hedge funds to run a net short position. Since the CFCT/CME began disaggregating the COT report into more trading “buckets,” the hedge funds have only been net short on on two occassions – now and in July/August earlier this year.  Gold staged an 11% move in August.

In the close to 15 years that I’ve been involved in the precious metals markets, when the bullion banks take extreme positions – either long or short – remarkably the market always seems to move in their favor.  Funny thing – that – because the law of averages would suggest a remote probability of this event occurring with 100% certainty.  We know the CFTC has never seemed to be able to find any indications of malfeasance or market manipulation – wink, wink.

Currently the hedge funds have their second largest net short position in the history of COT reporting.  Back in early August the net short hit a little over 14k contracts.   This explains the erratic trading in gold this past few weeks.  I would also be willing to wager that the hedge funds will show their largest net short position ever when the COT report is released.

Oh ya.  There was one other time when the hedge funds – labelled as “Large Speculators” prior to 2006 – were net short, and it was only for a couple days:   early 2000 right before the bull market in gold was launched.

Blatant Gold/Silver Manipulation Reflects The Complete Corruption Of The U.S. System

The morning of the FOMC announcement on Wednesday (Oct 28) gold was up $14 overnight, close to $1080 and the cartel’s dreaded 200 day moving average.  The “premise” was that the market was expecting another rate hike deferral.

I friend called me that morning and I told him to not get excited because when the FOMC policy decision hits the tape, they will annihilate gold and push the S&P 500 up toward 2100.   I was only 10 pts off on the S&P call, as the S&P 500 closed at 2090, up an absurd 24 points.  Gold was taken to the cleaners:

ComexGold

SPX

What’s incredible is not one mainstream media analyst or reporter questions this market action. If the premise behind the gold sell-off was a “hawkish” FOMC statement and the threat of a rate hike in December (yawn), then the exact same premise should have cause a big sell-off in stocks. Since when does the threat of tighter monetary policy not hit the stock market?

Just to recount the play-by-play in gold, the moment the FOMC announcement hit the tape, the Comex computer system was bombarded with sell orders. At this point in the trading day, the ONLY gold/silver market open is the Comex computer Globex system. In the first 30 minutes 29.6k contracts were unloaded – 2.6 million paper ounces. In the entire hour after the announcement 50.5k contracts were unloaded – 5.1 million ounces. Note that the Comex is showing around 200k ounces to be available for delivery.

The blatant, unfettered manipulation and intervention in the gold and silver market is sponsored by the Fed and the U.S. Treasury, executed by the big bullion banks and fully endorsed by the CFTC.

Dan Norcini vomited up a theory that the hit on Wednesday was a product of long side (hedge fund) liquidation.  That view proved to be utter scatological regurgitation from an analyst who’s analysis and views have gone completely off the rails.  As it turns out, open interest increased by over 4,000 contracts on Wednesday.  So much for that “long liquidation” idiocy.

The manipulation of the gold and silver market is a nothing but a product of complete systemic corruption.  The only way that the Fed and the politicians can claim that the economy is “fine” and QE “worked” is to make sure that the one piece of obvious evidence which would say otherwise is kept highly restrained.

I’ve told colleagues for years that the only way the elitists will let the Comex default, causing gold and silver to launch in price toward Pluto, is when they know they can no longer support their fraud.

If I’m wrong, how else to do you explain the fact that the front-running candidate to be the next President of the United States is openly a criminal and traitor who should be devoting her entire resource base toward defending herself from being throw in jail forever?  This person, by the way, issues a statement today giving the U.S. economy an “A.”

On a positive note, I do believe that this country is in its 9th inning and there will be no extra innings in this game.   Gold and silver do appear to be back in an uptrend, with a lot of pressure from the part of the world that demands physical delivery.

 

Gold Was “Fixed” At The London A.M. Price Fix

They often “fix” the price of gold at the London a.m. price fix – that’s for sure.  Although the LBMA London gold fix mechanism was supposedly cleaned up and reformed, those of us who have studied the gold market for at least the last 14 years know that the London “fix” is still the same old corrupt price-fix scheme.

Last night was particularly blatant, as gold was threatening to break over the key 200 day moving average technical level ($1,176 on the continuous contract basis) – note:  the x-axis is Mountain Standard Time, all references are in EST – click to enlarge:

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As you can see from the graph above, the price of gold was moving laterally during most of Asian/Indian trading hours. Not shown is the $9 gap up in the price of gold about an hour in to the Globex system trading session (9:10 p.m EST) when China devalued the yuan.

In the half-hour of the designated London a.m. “Fix” period, 9,620 paper/electronic Comex gold contracts traded, representing 962,000 ozs of gold (the Fix is a process, not a point in time).  This is compared to the 171k ozs of gold reported by the Comex vault custodians as being “deliverable.”  In the 30-minute period prior to the London “Fix,” a mere 1,260 paper/electronic gold contracts traded.  In the 30-minutes subsequent to the “Fix,” 2,871 contracts exchanged hands.    Please note: there were no news reports or events that would have influenced any of the trading markets during the London “Fix.”

Personally, I’d like to see an independent audit of the bars – visually open to the public – which includes all of the record-keeping associated with each bar.  In other words, contrary to most well-read gold market analysts, I do not trust or believe the vault reports as submitted by the HSBC, Scotia and JP Morgan, who control 96% of the total reported on the Comex.

It’s pretty obvious that as the price of gold threatened to take out a key technical level, a large seller dumped an “electronic contract bomb” on the market, which triggered hedge fund algo technically-driven selling as a means to take the price down.

Interestingly, gold shot right back up after the dismal U.S. retail sales report released at 8:30 a.m. EST.  There’s no question that – at least for now anyway – gold is behaving differently than it has over the past four years.   It seems that price hits are being bought rather than chased lower and moves higher are being chased higher rather than being sold.

Certainly the fundamental support underlying the gold market continues to strengthen every day, as it has for the last 15 years.

SoT #48 – Bill Murphy: Violent And Breathtaking Moves Coming In Gold And Silver

One of my sources says the silver is the most explosive they’ve ever seen it in terms of what is coming down the pike. To get it in size is extremely difficult and they expect it to disappear sometime this fall where you just can’t get it – and they’re adamant about it.  – Bill Murphy, Shadow of Truth

It’s been four-plus years now since the gold and silver markets have been subjected to the complete criminal control of the western Central Banks and their agent bullion banks.

We have all these market where the big banks have been fined for criminality whether its energy, LIBOR, currencies and mortgages – with every other market they’ve found wrongdoing and they can’t find any wrongdoing in the gold/silver market? It’s a joke.  – Bill Murphy

The heart of the precious metals manipulation scheme is to legitimize the manipulation and control over every other major asset market which has been enabled by the Federal Reserve and U.S. Treasury printing presses – dollars and Treasury certificates, respectively. Both of these fraudulent forms of “money” are the mechanisms by which the elitists are sucking the wealth out of the U.S. economic system – a wealth transfer scheme of historically unprecedented size.

The dislocation between the current “price” of gold and the actual fundamental value of gold based on underlying fundamentals is probably the widest valuation dislocation of any asset market in the history of the universe.   It is truly stunning.

Supply and Demand in the Gold and Silver Futures Markets

This article establishes that the price of gold and silver in the futures markets in which cash is the predominant means of settlement is inconsistent with the conditions of supply and demand in the actual physical or current market where physical bullion is bought and sold as opposed to transactions in uncovered paper claims to bullion in the futures markets.

The supply of bullion in the futures markets is increased by printing uncovered contracts representing claims to gold. This artificial, indeed fraudulent, increase in the supply of paper bullion contracts drives down the price in the futures market despite high demand for bullion in the physical market and constrained supply. We will demonstrate with economic analysis and empirical evidence that the bear market in bullion is an artificial creation.

As most of now understand and except – at least anyone with two brain cells to rub together or anyone with the moral fortitude to admit the obvious – the gold and silver markets are almost continuously manipulated with a web of paper gold and silver that consists largely of Comex futures, LBMA forward, OTC derivatives and Central Bank/bullion bank custodial hypothecation agreements.

Dr. Paul Craig Roberts and I apply the law of supply and demand – the foundation of economics and capitalism – to the dislocation between the paper bullion and physical bullion markets in order to demonstrate that the only possible conclusion is that these markets are highly manipulated.

The manipulation of the gold price by injecting large quantities of freshly printed uncovered contracts into the Comex market is an empirical fact. The sudden debunking of gold in the financial press is circumstantial evidence that a full-scale attack on gold’s function as a systemic warning signal is underway.

You can read the full article here:  Supply and Demand in the Gold and Silver Futures Markets.

JP Morgan And Citi Are Using OTC Derivatives To Manipulate Gold And Silver

Financial regulators around the world have recognized an immediate and pressing need to address possible regulatory protections in the OTC derivatives market.   – Brooksley Born, 1998 as Chairman of the CFTC – LINK

(Please note:  this scheme too will blow up in their face just like Long Term Capital, Enron, Bear Stearns, Lehman, AIG/Goldman.  The taxpayers will be bailing out the banks – and now we know why Citigroup wrote the legislation that enabled banks to move their OTC derivatives positions to their FDIC insured units – but gold and silver will go parabolic)

Back in the late 1990’s, the then head of the CFTC – Commodities and Futures Trading Commission,  the Government entity which is supposed to oversee futures and derivatives markets (enforce the laws in place to prevent criminal activity in these markets) – Brooksley Born embarked on an effort to impose oversight and regulation on the burgeoning OTC derivatives markets.  We all saw back then the dangers they impose on the system when Long Term Capital imploded and almost took down the global financial system.

I was a junk bond trader back then and vividly remember the entire affair.  In fact, Bankers Trust was the pioneer in OTC derivatives and it also had to pony up the most amount of money to bail out the system from Long Term Capital.  I also had been involved in using OTC high yield derivatives – unregulated – to hide large, risky and illiquid junk bond positions from the Bankers Trust risk management team.  We always did this right before the period in which the bank began calculating bonus pools.  In other words I know first-hand the many ways in which OTC derivatives can be used in corrupt ways to game the system and squeeze enormous profits from the markets.  “Markets” meaning, the people on the other side of your trade.

Of course, Robert Rubin,  Larry Summers and Alan Greenspan put on a full-force lobbying effort to destroy Ms. Born’s effort in Congress and the rest is history.  OTC derivatives are not only financial nuclear weapons of mass destruction, they are right now about the only source of real cash flow for the big banks.

But they are also used to inflict criminal manipulation on the gold and silver markets.  Dr. Paul Craig Roberts and I have written an article outlining the most likely way in the which the big big bullion banks – primarily JP Morgan and Citigroup – are implementing the recent massive spike up in gold and silver OTC derivatives in order to manipulate and suppress the price of gold and silver.   Bear in mind that, thanks the Rubin/Summers/Greenspan triumvirate, we have absolutely no way of knowing exactly how these securities are structured.  And yet – as we’ve seen with Long Term Capital, Enron, Bear Stearns, Lehman, AIG and Goldman – they can catastrophically effect our lives financially.

Are Big Banks Using Derivatives To Suppress Bullion Prices?

Paul Craig Roberts and Dave Kranzler

We have explained on a number of occasions how the Federal Reserves’ agents, the bullion banks (principally JPMorganChase, HSBC, and Scotia) sell uncovered shorts (“naked shorts”) on the Comex (gold futures market) in order to drive down an otherwise rising price of gold. By dumping so many uncovered short contracts into the futures market, an artificial increase in “paper gold” is created, and this increase in supply drives down the price.

This manipulation works, because the hedge funds, the main purchasers of the short contracts, do not intend to take delivery of the gold represented by the contracts, settling instead in cash. This means that the banks who sold the uncovered contracts are never at risk from their inability to cover contracts in gold. At any given time, the amount of gold represented by the paper gold contracts (“open interest’) can exceed the actual amount of physical gold available for delivery, a situation that does not occur in other futures markets.

You can read the rest of this here:   OTC Derivatives Are Used Manipulate Gold And Silver

Click to enlarge:

GOLD_Q1SilverOTCderivs1

Russia Continues To Dump Dollars And Buy Gold

The enormous effort by eastern hemisphere countries to diversify their reserves out of the dollar and into physical gold is quite remarkable.  The latest reports out of Russia show that is has cut its dollar exposure in half since January 2014 and appears to be accelerating its accumulation of gold:

OUT OF DOLLARS (source: Smaulgld.com, U.S. Treasury):

RussiaDollars

AND IN TO MORE GOLD:

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Meanwhile, physical gold held in western custodial accounts at Central Banks and trading exchanges continues its exodus.

Koos Jansen has reported that custodial gold at the Bank of England dropped another 351 tonnes in the latest reporting period: Bank of England Custodial Gold Drops 351 tonnes

Craig Hemke of TF Metals Report did some sleuth-work on the Comex vault data and discovered that over 37 tonnes of gold was removed from Scotia Bank’s customer custodial account at the Comex:   Investor Gold Flees Scotia’s Comex Vault

Finally, since February 11 this year, over 72 tonnes of gold has been removed from the GLD trust.  The only way gold is removed from the GLD trust is if any of the Approved Participant banks – the usual suspected criminals – redeems 100,000 share baskets of GLD stock in exchange for physical gold bars held in Trust.   In fact, I have heard reports from several credible sources in London that big investment accounts which have tried to exchange shares for gold have been denied.  If you read through the fine-print of the GLD prospectus, you’ll find that the Trustee indeed has the option of denying exchange for physical requests.

The big question in my mind – and one which we’ll never know the answer to until it’s too late for the victims- is whether or not the gold being removed from custodial accounts held at banks, Central Banks, exchanges and GLD is being delivered to their rightful titled owners or if its being hypothecated by the bullion banks and shipped to the east.

I have a instinctual belief that when the “gold grab” begins in earnest in the west, and the trusting entities/individuals who trusted their gold with criminal bullion banks look to take delivery, we will find that “Mother Hubbard’s Cupboard is bare.”

We are in an era in which Rule of Law has been replaced by Rule By Those In Power.  There is no accountability for the wealthy elite and, and the political puppets of those elite, as they continue their massive theft of wealth from the western economic and financial system.