Price rallies, Banks add shorts. Price falls, Banks cover shorts. This is how the game has been played for years and it continues to this day.
We're once again discussing the CFTC-generated "Bank Participation Report". So, as usual, we begin with this disclaimer:
- The CFTC's Bank Participation Report is issued monthly from a survey taken at the Comex close on the first Tuesday of every month. The report summarizes the combined positions of the four largest U.S. banks (primarily JPM, MorganStanley, Citi, Goldman but occasionally others) and the twenty largest non-U.S. banks (Scotia, HSBC, DeutscheBank, UBS, Barclays and others).
- These reports might be half-truths and/or complete falsifications, designed to mislead you and get you leaning the wrong way. Just last year, JPMorgan was fined by the CFTC for "repeatedly submitting inaccurate reports relating to the required reporting of positions". See here: http://www.cftc.gov/PressRoom/PressReleases/pr6968-14
I will leave it up to you, dear reader, to assign or withhold legitimacy to/from the data. Commitment of Traders reports at least show data that balances shorts with longs. Since we have no idea how many Banks operate offshore trading funds outside of these reported proprietary positions, it's impossible to know how many longs or shorts any individual bank may truly have. Additionally, these are just Comex positions. The size and scope of derivative positions in the OTC market can/will never be known.
OK, so here we go. To keep it simple, let's just look at the changes to the Bank positions here in 2015.
You may recall that gold surged right out of the gate in 2015 with a huge rally that took price from a 12/31/14 close of $1184 all the way to an intraday high of $1308 on January 22. A BPR survey was then taken on February 3, with price having already fallen back to $1260. Here's what it showed:
So, to no surprise with Banks now massively NET SHORT, price continued to decline over the next few months before bottoming in the days following the massive, deliberate and orchestrated raid of Sunday July 19. Another BPR survey was taken on August 4 and it looked like this:
In total, the 24 Banks added 72,386 NET shorts while price rallied to begin the year and then they took those shorts and more back off while price fell. We wrote about this back on August 11 and urge you to review this post now for some further background and numbers: http://www.tfmetalsreport.com/blog/7058/bank-participation-report-july
And here's where we are as of last Tuesday, October 6. Price that day closed at $1146, up $55 or 5% from the August lows:
So, you see, this isn't complicated. The benevolent and altruistic Bullion Banks, which only seek to promote an orderly and fair paper market, always sell longs and add shorts while price rallies and then turn around and add longs and cover shorts while price falls. This is how it has always worked and this is how it will continue to work until the day finally comes when the music stops.
When will that be? It's impossible to say. Until then, however, we'll continue to shine the light of truth upon this brutally unfair, deceptive and fraudulent paper derivative price discovery scheme, hoping (if not in vain) to bring about an end to this racket as soon as possible.