Myself and a few others – primarily GATA – have been suggesting for quite some time that contract open interest data the CME reports for the Comex is rigged. While certain newsletter peddlers adamantly maintain the reports are accurate and honest in order to preserve their franchise, there’s nothing like a the CFTC imposing a fine on JP Morgan for fraudulently reporting “large trader” data: CFTC Charges JP Morgan With Reporting Fraud.
JP Morgan has finally been caught and sanctioned for playing games with its position reporting in gold and silver in order to hide the true magnitude of its unhedged short positions on the Comex. That JP Morgan does this is obvious to anyone who has spent several years studying and trading the Comex.
After all, how are the CFTC’s COT reports compiled? They come from big banks who are the primary Comex market-makers, of course. There’s no independent audit of the numbers. The reports are sourced from the banks then submitted to the CME and the CFTC. It’s a “trust us” job – wink wink.
IF JP Morgan et al were to be honestly and accurately reporting the data published by the CME and CFTC, it would be the ONLY area of their financial reporting that is not completely engulfed with fraud.
Anyone who chooses to believe otherwise either has ulterior motives – like making a lot of money selling newsletters – or still believes in Santa Claus.
In fact, while the COT report still holds some small degree of validity in terms of showing us what was happening a week ago on the Comex, I believe that the COT is now largely useless for the purposes of making money on the information.
First and foremost, the numbers are to some degree fraudulent. The second reason is that the informational content for trading purposes has lost value.
Ten years only a few crazy gold and silver bugs looked at the COT reports and used them to trade. Back then the informational content had market value as a source of informational “inefficiency” derived from the fact that so few “brains” and so little money on a relative basis was using the information to trade.
Now, everyone under the sun who follows the precious metals market looks at the COT reports and incorporates the information conveyed into their trading strategies and investment outlook. Because so many “eyeballs” and a lot more money is involved, it can be said that the market has become more “efficient” with respect to this information – any informational “edge” that used to be offered from analyzing the COT is no longer available.