-- Published: Wednesday, 31 October 2018 | Print | Disqus
By Craig Hemke
A small move in price enables The Banks to lay the shorts right back on.
Just three weeks ago, we warned you to ignore newsletter pundits who were claiming that one day soon, The Banks that operate on the COMEX will be long and on the side of the regular investor/stacker. As with all nonsense, this sentiment ignores reality. Before reading further, I urge you to read this post from October 9: https://www.sprottmoney.com/Blog/the-banks-are-not...
October 9 was a Tuesday, and that's pretty handy because all of the CFTC's Commitment of Traders surveys are taken after the COMEX close on Tuesdays. Back on October 9, the price of COMEX gold closed at $1191. The CoT survey taken that day was reported on Friday, October 12. And what did it show? Check the handy spreadsheet below from Goldseek.
As you can see, on October 9 the positions were summarized as follows:
• The Large Speculators (primarily hedge funds, managed money, trading funds) NET SHORT 38,175 contracts. This was a new ALL-TIME HIGH NET SHORT position for this category.
• The Commercials (primarily Big Banks like JPM, HSBC, MS, etc.) NET LONG 25,866 contracts . This was a new ALL-TIME HIGH NET LONG position for this category.
• On the disaggregated report, the sub-category "Managed Money" was historically NET SHORT 109,544 contracts, as you can see below.
Fast-forward two weeks to Tuesday, October 23. The price of COMEX gold had risen $45 to $1236 and another CoT survey was taken. This report was released last Friday, the 26th, and it is shown below.
So, on a price move of less than 4%, it's quite clear that The Banks have revealed themselves as NOT "on your side". Not now, not ever. The positions on this most recent report can be summarized as:
• The Large Speculators are now NET LONG 29,388 contracts—a NET move of 67,563 contracts.
• The Commercials are now NET SHORT 46,520 contracts—a NET move of 72,386 contracts.
• The "Managed Money" sub-category is now NET SHORT 38,116 contracts —a NET move of 71,428 contracts.
So, what has happened here? Did The Banks "stand down" and "allow price to run"? After The Commercials moved to NET LONG for the first time in decades, did they suddenly decide to profit on the long side? OF COURSE NOT! And anyone who foolishly believed that the COMEX paradigm had suddenly changed has just gotten the cold slap in the face of price manipulation reality.
Understand this: The Banks manage the current Digital Derivative and Fractional Reserve Precious Metal Pricing Scheme. They benefit from it. They profit from it. And they WILL NOT ever walk away or flip. Never. Ever. Instead, they will fight to maintain their System until the very last hour—and trade—of its existence. Under no circumstances will The Banks ever be "on your side" or your "friend".
And the same is true for COMEX silver. On the CoT survey of October 9:
• The Large Specs were NET SHORT 22,250 contracts.
• The Commercials were NET LONG 3,555 contracts.
Two weeks later, and with price a measly 50˘ higher, the survey of October 23 showed:
• The Large Specs NET SHORT just 5,179 contracts.
• The Commercials NET SHORT 13,262 contracts.
As in COMEX gold, there was no "flip". There was no "standing down", and there is no paradigm shift. Instead it's just the same old, same old. On the rally, the Large Specs buy and cover while The Commercials sell and short.
What's next? Given the historical record, The Banks will likely try to rig prices back down by reverse-engineering the same process that led The Specs to buy and cover in the first place. For example, expect an effort to be made to move price back down through the 50-day moving average in COMEX gold. It was the break upward through the 50-day on October 11 that triggered the majority of the hedge fund short-covering. By dropping price back below the 50-day, The Banks will hope to encourage these same hedge funds to get right back in on the short side. The Banks will use this renewed Spec selling to buy back their own recently-added shorts at a profit. And the whole process can begin again.
So, please: the next time you hear someone state that "The Banks are getting long" and that price is thus "set to explode", think otherwise. The Banks that operate on the COMEX are NOT your friend, they are NOT your ally and they are NOT interested in profiting on the long side. Instead, their goal is to manipulate and manage price to their own benefit and to the benefit of their Central Bank Masters. This has been the case since precious metals futures contracts came into existence in 1975, and it will be the case until this system finally implodes under the sheer weight of its inherent corruption, deception and fraud.
Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.