Here’s One Reason Why The Big Banks In The COT May Be Wrong

Much speculation has been made about the huge jump in the short positions in gold and silver put on  by the big banks who manipulate gold and silver as reflected in the Commitment of Traders report.  Especially given that the gross short positioning of the big banks is well beyond the CFTC’s prescribed position limits.  Of course, as everyone knows, the CFTC has never enforced trading regulations against the big banks who manipulate gold and silver futures.  This time will be no different.

But there may be some factors that force a different outcome this time.  Factors beyond the ability of the western bullion banks to contain.  One such factor is an unexpected rush by wealthy investors who are holding their gold in big bank vaults and who decide that it’s time to eliminate the counterparty risk involved with this.

Alisdair Macleod wrote a must-read article describing this factor and how it could unfold.  It should be read by everyone who cares about the safety of their wealth:  Unwinding Unallocated Gold Accounts.

This may be one of the reasons all of the t/a chartists and COT-watching slaves have missed the move higher in gold and silver over the past two weeks…

10 thoughts on “Here’s One Reason Why The Big Banks In The COT May Be Wrong

  1. Excellent article. If enough big bucks decide they can’t trust bullion
    banks can guarantee delivery of their gold and there is plenty evidence
    why they shouldn’t trust this could be a game changer. If bullion banks
    continue to pile on the shorts trying to control price they could end
    up in deep shit which will be bullish for price when they eventually
    have to cover.

  2. Managing Volatility Risk

    Falling volatility in stock prices and other international assets has many investors feeling uneasy, as memories of low volatility on the eve of the Global Financial Crisis (GFC) engender a sense of déjà vu. With various volatility measures nearing pre-GFC or even record lows, there is increasing concern that the widespread declines in asset price volatility are disconnected from underlying economic fundamentals.

    Once investors start fleeing, it will be a massive herd getting stuck in the exit door while the fire is raging towards them.

  3. The point being missed here is that the Bank of England has negotiated with the Indian Reserve Bank a 500 t emergency gold loan. This loan allows the Indians to meet the Diwali demand internally and gives them a call of non-existent “fine gold’ at the Bank of England. The gold reserves of the UK, now sold, were about 600 t so a standby emergency loan of 500 t would be the normal credit you would expect to be kicked in to manage the default which must be going on behind closed doors. You can bet this loan is counter guaranteed by the BIS and India is just acting as a fee agent. The Indians wouldn’t do it otherwise. The account holders I suspect of all sorts must be about to get cash settled. As long as they can meet the Asian demand the POG will rise in an orderly fashion for probably six months maybe longer.

    The failure of the bullion banks to take the out on the silver and gold fixes and net out their positions through a forced negotiation means that they are covered and they expect their 5 t of silver and 18 t of gold derivatives to make money not lose it. They must have been covered by the Fed or the BIS.

    The COT positions make as much sense as the pot in a rigged poker game where the players pass it around to impress the pigeons before one sits down to get plucked. One week everyone says the bullion banks have done this and a short squeeze can happen and the next week the bullion banks will do a bear raid blah, blah. Really the managed money is managed by the bullion banks and the hedge funds live on credit from the bullion banks so they are all one player. The OTC market dwarfs the COMEX and London is completely opaque so what do COTs mean to anyone. The only market that is real is the one you can’t see which are the credit lines at the BIS.

    Where does this leave silver? I don’t think silver can be managed but then I didn’t think it could three years ago and it was. Who kicked in the silver I don’t know maybe the Indians will do a silver loan as well. But I fell silver credit has almost been exhausted but then I have been wrong before.

  4. I’m reading this Monday a.m. and gold has been taken down about $25 during overnight and London trading. My view has been, for quite some time, that fractional reserve type trading in gold will continue until there is a systemic run on the system. At that time we’ll will see a discontinuity where it will go no bid and the price, while still in dollars, will be multiples higher than what it is now.

    Although not 100 % proven, there is overwhelming evidence to support the view that there is nowhere near the amount of physical gold required to cover the claims outstanding, yet traders still play the fractional reserve game.

    Like in all markets today, the systemic risk, the gaming, and the moral hazard are beyond comprehension. When government and monetary authorities socialize all risk, this is what happens. But like all things systemic, whether in the physical world, such as structural supports, or financial, when it fails the outcome will be catastrophic. No entity – government, multilateral, or otherwise – will be able to salvage it.

  5. Six weeks green for slv, a feat unmatched since the Osilver Bin Laden massacre. They’re gonna shake the tree a bit this week, we’ll hang on.

    I asked my mailman buddy what would happen if the Post Office offered matching funds to buy US Mint Silver Eagles along with the usual stocks and bonds held captive in their money prison 401k. He said the mint would have to shut down.

    Let’s see, 500,000 career employees contributing 5% of pay matched 5% by gov.
    yeah, that ain’t gonna fly. Thank heaven for appl. Dave, as always, thank you.

  6. It looks like you spoke too soon. I converted a large part of my life savings to precious metals, but my position is currently worth much less than I put into it. I was hopeful that the PMs were moving higher–until I looked at them this morning. I don’t see how this manipulation is EVER going to end.

  7. It is Alasdair, but yes. My problem is that I thought all this 5 years ago. One would have thought that the smart money the world over could see that all roads lead to PMs and we’d be in the thick of massive shortages right now. At what point do a critical mass of investors take the PHYSICAL to zero knowing shortages will come? No hundredth monkey activity yet, and in being wrong before, I am not holding my breath now on the timing. BUT I know enough of how the story ends not to think of selling. I just wished I’d waited longer on several of my purchases to get more PM for the buck. In the end it won’t matter much.

  8. Hammer time? Fine, I’ll add more to XRA & AAU if they take ’em down harder. As far as Dave’s advice to go do something fun, I agree. This morning I made a lifestyle change, joined the thousands of bicycle commuters here in Seattle this morning… my route goes along the downtown waterfront & port bike trail, beautiful. Selling my car in September, with the savings I can pay down remaining credit card debt, add to my mining shares or physical, a few preps, and enhance my ability to vacation ~ went to Maui last November with my wife, memories are still lingering.

  9. You stupid baby boomers! That’s all you guys do is bitch and complain.

    You don’t “buy” the elements to make money.

    You exchange worthless Rothschild central bank notes for the only money that has stood the test of time!

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