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.

38 thoughts on “The Comex Is A Zombie Market: Hedge Funds Record Short Paper Gold

  1. Comex positioning is irrelevant. Even if there is eventually NO “eligible” gold left the bettors and their betting will still have the power to determine price.

    THEY DON’T WANT “GOLD”. They want paper $$$. Anyone playing there who is naïve enough to call for delivery will be paid off quietly and will go away.

    “Gold” is a horse on which to put bets. It could just as well be watermelon futures…

      1. “Implode”? Why? How?

        Without regulatory (government) action nothing will change. Bettors will retain their government-sanctioned power to set price and will still be placing bets the same day a claimant is paid off in cash…

        1. Nope. Markets are ultimately governed by the laws of economics/nature. Tell ONE instance when a rigged market did not collapse? You can’t. Know why? Because there’s not one instance. The U.S. is collapsing. The Comex is emblematic of that collapse process.

          1. The CFTC will only step in and investigate 4-7 yrs after the collapse and the banks will pay a small fine and no one will see time behind bars.
            Isn’t that what sound government is all about?

          2. Ya … but when you can print the worlds reserve currency, and when most US politicians can be bought & sold like whores; the charade can go on for a long time … IE: it took Rome something like 300 or 400 years to fall.

          3. Agree it will collapse but I have learned the hard way things that much longer then one would have thought. By the time it collapses we could all be six feet under. Who’s the competition for taking over..EU, Japan..nope. China…still a dictatorship so don’t see it as the safe haven.

            Look at the freaking real estate market. I can’t speak for the rest of the US but I know the Atlanta and S Florida market well. In both of those areas prices have hit new highs, there are new developments and active sales. I would have bet against that happening after the recent bubble, actually I did and lost.

            The control over markets by the powers that be has never been higher. Since I assume we are all trying to make a buck from this freak show it’s something we should keep in mind. Fundamentals matter but the time frame is a bitch

          4. Atlanta and S Florida are smoldering embers from the latest “fire” built by the Fed. Most markets have peaked and are reporting declining sales volume and falling prices. You have to assess it month to month, not year over year. Foreign money has dried up. Soon the affects of overbuilding will force the S Florida and Atlanta markets to join the rest of the country as its quickly headed down.

    1. I suspect everyone else suspects that this is the case.
      Any chance you can provide documentation of the paying off quietly part?

  2. think of comex as a “friendly” poker game gone not so friendly when at the end of the nigh a couple of the losers cannot make good on what they lost.

    I guess that’s why even in friendly poker games, the players put up money in advance for the chips, and if they need more, they buy from the winners.

    what a novel approach, if you sell something short in any market you have to “deposit” either gold or stock or cash to make sure you can make good on it.

  3. In two weeks time a new bull market in gold will begin. The COMEX and GLD crap manipulation will also work on the upside. Sometime in 2016 we will talk about when gold will hit $2000.

  4. It will be interesting to watch what happens this month. The December open interest is much higher than the registered COMEX inventory.

  5. THEY DON’T WANT “GOLD”. They want paper $$$. Anyone playing there who is naïve enough to call for delivery will be paid off quietly and will go away.

    Tell that to the Chinese and the Russians and the Indians. They’ll skim the game as well. And then redeem in Shanghai phyzzzz. Are we really to believe the reason they’ve been buying physical Gold & Silver is so they can put it in their vaults to look at ? Seriously ?

    Prepare accordingly.

  6. “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.”

    At some point we’ll all be dead.

      1. Do you mean Albert Camus, the writer? No, but I am his great nephew.

        What I meant was that the criminality will not stop until the criminals are prosecuted. Since this will obviously never happen, there is no reason (for me at least) to buy precious metals. Those that buy and wait for the manipulation to magically stop and the price to rise will be waiting until they are dead. This criminality would have been punished 20 or 30 years ago, but we are now a lawless, criminal regime.

        1. I referencing the death reference. Camu says that since we all die anyway, what does it matter if you die now or die in the future? lol

        2. I referencing the death reference. Camus says that since we all die anyway, what does it matter if you die now or die in the future? lol

  7. Dave,
    I know you don’t get payed from SOT but I’m kinda missing yours’ and Rory’s weekly breakdown. We can’t let these sob’s control the narrative, just remember you’re loved out here.

    1. Thanks. Rory wanted to end the show for personal reasons. We are interviewing PCR on November 15. Probably gets posted the 16th.

  8. If JPM owns both sides of the trade , it’s a wash. I can’t help but feel they flood the market with paper just to confuse those trying to make since of it all.

  9. A bit off topic but maybe not-

    We have heard of the golden age or gilded age, the age of reason, the stone age, the iron age and the like, it is time to give this age we are living in its proper name,
    we are living in The DIS Age, as in DIS-trust of the data, DIS-trust of the main stream media, DIS-belief in our leaders in Washington DC, the state capitals or city hall, DIS-belief that Wall Street will be reigned in by the government, DIS-information fed to us daily (not including this blog of course). This is truly the DIS age.

    With all of the manipulation, lying, fabrication of data, etc. concerning gold, silver, housing, employment, inflation and practically everything else, what other name can best describe this age than the DIS age?

  10. The age of the DIS-aggregation of Reality…I can go with that

    Thanks DK you were exceedingly eloquent today….Kudos

    1. Apparently not. I had not even noticed. There’s some comments on the Seeking Alpha article I wrote linked in my blog post. I guess people don’t care that the bottom is falling out of the housing market and the criminals at the National Association of Realtors are trying to cover up the truth with their bullshit propaganda and fraudulent data. They’ll care when they realize they are underwater on their mortgage again and the ensuing credit collapse triggers a collapse worse than 2008…

      1. The homebuilders are one currently one of the best short-sell plays in the market. I bet at least two of them go tits up before the end of 2017. That means if you short it, you never have to cover.

      2. It seems odd. I actually posted a comment for that post and it didn’t show. I realize there’s moderation for comments, and I figured maybe mine didn’t pass muster, but it seems odd that no one’s was approved.

          1. Actually it does show up, just not in the tally figure of comments at the end that you see at the main page, which is also odd, but in a different way.

  11. As some analysts have speculated, when the crash comes it will be sudden. Only what you have in your possession will matter. Expect that everything else will be locked down or minimally accessible. Much of the paper gold will be confiscated as the liability will be too great to redeem. All these folks who trusted in the news, the clueless analysts and their revered institutions will be stunned. Can gold go up if people can’t get at their cash or have lost their cash? I don’t know. Whatever the situation, it will not be nice. Maybe now is a time to stock up on some whiskey?…..

    1. If i may humbly suggest, now is the time to learn how to keep a low profile.
      If things go south fast civility and law and order will follow. It will be like the wild west where the man with the fastest gun or the most gunslingers working for him will be calling the shots.

      If anyone knows you have gold or silver you might become a target for your metals. When things crash and burn it is a good idea to cry to anyone within earshot that all the gold and silver you had was lost when the bank seized your safe deposit box or the paper gold wasn’t worth the paper it was written on. Learn to be a bit of a con man, conning would be robbers that you lost it all. Owning booze for trade isn’t a bad idea, having tobacco or marijuana (depending on your locale) for trade is also worth considering.
      Trading in gold and silver can only be done when it is safe to do so, meaning wait for a few months or years for things to calm down before exchanging PMs for goods.
      Just my 2¢.

  12. “Wash, rinse, repeat.”

    There is one thing I do understand very well: The bullion banks act as agents of the Fed to push the gold price down.

    There is one thing I DO NOT UNDERSTAND AT ALL: If the bullion banks go short or long (as obviously now) — why are there still hedge-fund managers who bet against them? If I’m beaten up once and again (like a small school boy), I’d leave this unfair game — I’d run away.

  13. When are the Gold mining companies & funds going to start suing the COMEX? … or are they going to continue letting the COMEX run a ponzi scheme for their primary product and destroy their industry?.

  14. there’s significant banker infiltration into the mining companies management and board of directors that they will not upset this apple cart. the deal, IMO, is to lose millions on the mines and kill the shareholders and punish them for thinking gold equities are safe haven; payoff is access to the fed zirp funds where they make Billions. Gold is a loss, but they are killing sentiment amongst mainstream towards their only true enemy: honest money.

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