Tag Archives: COT report

Official Intervention In The Gold Market Is Now Blatantly At Work

The damage done to gold on Friday was due to skillfully timed flash crashes rather than powerful selling.  – John Brimelow, JB’ Gold Jottings Report

As a wider audience of market observers becomes aware of the flagrant use of the paper gold market to manipulate the price of gold, the degree of intervention in the gold market by the Fed/Treasury becomes more openly aggressive.

Eric Dubin of the News Doctors wrote a useful commentary on the current effort by the “gold cartel” to take down the price of gold:

The cartel is acting aggressively this week on top of the mountain of paper-based gold issuance into the COMEX market they’ve been shoveling into the short side already – for weeks – in an effort to slow momentum. Now, as you see today, with traders getting nervous considering sky high commercial short positions and an FOMC meeting starting tomorrow, is it any wonder that the cartel was able to get some traction to the downside?

You can read the rest of his analysis here:  The News Doctors

 

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.

Questions About Analyzing Gold Futures COT Data

GATA’s Treasurer and Co-founder, Chris Powell, forwarded an inquiry to me from a precious metals market participant who had some questions about sourcing and analyzing gold futures trading data, like the Commitment of Traders (COT) report.  I thought I would share the questions and my response because I think it will help clarify a subject that has been heavily cloaked in opacity and confusion by Wall Street and the Government (CFTC).   Here was the inquiry:

As you can see by the Zeal chart – Zeallc.com LINK –  the shorting of gold futures has risen to 200K contracts, which is at least a 16 year high.  While I realize that this is only one component of the manipulation of the gold price, I would like to follow it more closely.  Do you know where I can get the most recent data on gold shorts?

When I look at this – COT LINK –  it appears the 200K number comes from the commercial shorts only.  But why would Zeal only focus on the commercial shorts and not the net position?

When I look at this chart – Gold futures COT chart –  I’m very confused as to what I should be paying attention to.  What would you be paying attention to when looking to see what the trends are on the Comex?  Any suggestions are appreciated.

Those were great questions and I wanted to share that inquiry plus my response:

With regard to monitoring the long/short positions of gold/silver, you answered your own question.  This is the source:

http://www.cftc.gov/MARKETREPORTS/COMMITMENTSOFTRADERS/INDEX.HTM

If you want to follow the daily changes in open interest you can look here:

http://www.cftc.gov/MARKETREPORTS/COMMITMENTSOFTRADERS/INDEX.HTM

That report is updated for gold/silver around 10:00 a.m. every day, reflecting the previous day’s trade settlements.  It does not show which trading categories bought or sold, just the overall changes in open interest.

The shorting of gold futures is the primary “visible” component of manipulation.  The other components – OTC derivatives, leases and hypothecation are all behind the scenes, hidden from sight and it’s impossible to track those activities.  I believe that the more insidious exertion of manipulation occurs in those activities and that’s why it’s hidden from public view.

Adam Hamilton is behind the times.  Historically the commercial gross short position in gold and silver moved inversely with the price.  When the shorts were high, the price had been manipulated lower.  Then the commercials would reverse it by covering their shorts at a big profit, their gross short position would decline significantly and the short covering would drive the price higher.

The managed money “hedge funds” would take the other side and always lose money.

NOW the managed money – via algorithm-driven HFT trading – seems to have begun to piggy-back the the commercial selling momentum. That’s why now we are seeing large managed money shorts when the price is going lower.

To be honest with you, there’s so much fraud and corruption going on in the reporting of all of this information that it’s really pointless spending the time collecting the data, analyzing it and trying to understand it.  JPM was fined recently by the CFTF (a small, meaningless $650k fine) for stuffing commercial trade tickets into the managed money account bucket.  I guarantee you they still are doing this.

Also, there’s so may “eyeballs” now vs. 10 years ago looking at it that it’s largely removed any value from the information content (and that content is subject to high degrees of reporting fraud anyway).

People like Hamilton and Ted Butler make a lot of money selling newsletters analzying the COT data, so they will defend the value of doing so and the veracity of the data to the bitter end.

But the bottom line is that I wouldn’t spend much time trying to figure out what’s going by looking at the COT and open interest numbers. It’s become a waste of time.

I no longer put much energy in this endeavor, after having spend the better part of the last 15 years looking at the numbers religiously.  I now briefly scan the COT weekly and o/i numbers daily just out of intellectual curiosity to see where they stand and to confirm every week that my view on what I just laid out above is correct.

It is correct and will remain correct until the system collapses.

Hope that helps.

The Truth About Comex Data And CFTC COT Reports

Think about this:  bullion banks and large buyers of gold/silver deal in bars and tonnes. Think about how many silver eagles it would take to piece together enough to re-melt and fabricate into a meaningful quantity of marketable bars. Nothwithstanding the expense of doing this, it is an absurd notion that they would even bother with it.  Especially when the Comex and SLV have plenty of bars that are available for hypothecation.

The enormous quantity of silver eagle sales are going to the growing legion of individuals in this country and Canada who understand that the dollar is going to collapse sooner or later. It is poor man’s gold. It is more fungible as currency than 1 oz gold coins. Ultimately, it is a possible signal that eventually the people will rise up and overthrow a completely corrupt system of Government and banking.

A reader of my blog – a high profile money manager and market strategist – sent me an email with kind words about my statement criticizing Ted Butler’s  theory that JP Morgan is the entity that is the buying 1 oz. silver eagle coins in record quantities this year.

His comment stimulated a response about my view on the work being done by Ted Butler:

I believe Butler turned his ability to analyze the silver market – and the fact that he was one of the few people doing it for a long time – into a newsletter selling juggernaut. Now the only evidence he looks at and evaluates is the evidence that supports and promotes subscriptions to his newsletter. Although readers of my blog send me copies of Butler’s newsletter twice a week to ask my opinion, I stopped “absorbing” his analysis about 5 years ago.

1) His COT and open interest analysis relies on the all of the data being honestly and accurately reported. But from where is the data sourced? It’s provided by the big banks who run the Comex. If the COT, open interest data and warehouse stock data are accurate and honest, it would be the ONLY financial reports that come from banks that are honest. What are the odds of that? Butler refuses to question that premise and I’ve exchanged emails with him over the years pointing this out and he refuses to accept even the slightest possibility that the data is corrupt. In fact, he’s outright contemptuous of any thought that the data may be corrupt.

2) He refuses to consider the possibility that GLD and SLV lease and hypothecate their metal. He’s the only person I know who has read every word of either prospectus  who is willing to believe that the GLD/SLV metal inventory reports are accurate and honest. In fact, I find it hard to believe that Butler has bothered to even read the entire prospectus of either Trust. Again, ultimately, the reports which are used by the Trust accountants and which are published on a daily basis are generated and sourced from the banks (HSBC and JPM) who safekeep the metal. It states right in the Prospectuses that the custodians are the keeper of the financial reports connected to the custody of any metal. There are strict legal restrictions on ANYONE’s ability to visit the bank premises and inspect the files.

I will say that his method of analyzing the COT data was at one time original and informative. But that time has past by. I will also say that he did a lot to open the market’s eyes to the manipulation of the silver market. But ultimately, as the exercise of the market looking at, analyzing and absorbing the COT information becomes widespread, the information becomes quickly priced in, right? If a few people use and trade it, it works. If the entire market sees it and tries to use it, it prices in immediately.

I truly believe that, ultimately, the banks distort the COT and Comex data into a shape and form that they want us to see and believe – just like everything else they do. Butler refuses to acknowledge and accept this possibility because it would mean that his work has no value. It also means that there is a distinct possibility that the Comex banks are actually using Butler (unwittingly) as a tool to promote the credibility of the reports.

At the end of the day, our system is growing more fraudulent and corrupt by the day.  And the Government that is supposed to be in place to enforce the laws has actually become a partner with Wall Street and Corporate America in doing whatever it takes to steal as much wealth from the public as they can before the country collapses.   But don’t take my word on it, read a few history books and then read or re-read Orwell and Rand and decide for yourself…