We Now Have Proof that Bank Trading Desks Manipulate Everything

by TF, TFMetals Report

Back on Thursday, I had the pleasure to visit with Rory Hall and Dave Kranzler as a part of their "Shadow of Truth" series. If you have some extra time this holiday weekend, please give this a listen.

While we're at it, just a little more background on the grotesque CoT report that was sent out late Friday. I've seen some commentary and "analysis" this weekend and it all seems to focus upon the "buying of the specs". This kills me…the buying of the specs. As if that's the big story.

Here in Turdville, we focus upon the ongoing and ever-present market manipulation of The Bullion Banks. And if you're one of those "flat earth" types that still believes in free markets, I encourage you to read this:

http://www.nytimes.com/2015/05/23/opinion/banks-as-felons-or-criminality…

So, let's see. We now have proof that Bank trading desks manipulate:

  • LIBOR
  • Forex
  • Industrial metals
  • Energy
  • Swaps
  • Equities

But NOT gold and silver. Heavens no! Those are free and fair markets. Uh-huh…

Anyway, back to the CoT. During the reporting week of May 13-19, the price of gold rallied over $35 before giving back $21 and finishing +$14. For three consecutive days, gold closed above key resistance at $1220 and the always-important 200-day moving average. It was on the verge of a breakout and, in the face of a sharply-falling dollar, it was poised to begin a virtuous cycle of higher highs and increasing momentum. Well, of course, NOT if The Banks have anything to say about it.

For the reporting week, the Large Specs bought 23,000 new longs and covered 22,000 existing shorts. That's 45,000 contracts of buying pressure. On top of that, the Small Specs added nearly 10,000 contracts of buying pressure. Taking that other side of these trades were your supposedly altruistic and benevolent Bullion Banks. But they didn't just simply sell their own existing longs into this buying. Oh no, of course not. Instead, they issued and absorbed nearly 51,000 new naked shorts. Let's do some math, shall we?

  • 50,754 new short contracts at 100 ounces per contract is 5,075,400 troy ounces of paper gold
  • That's 158 metric tonnes
  • More than the total admitted holdings of Thailand
  • More than 5% of total annual global mine supply
  • More than 75% of total annual U.S. mine supply

And here's where it gets really disgusting and downright criminal. If we combine the holdings of the six, CME-approved Comex gold vaults…both registered AND eligible…we find these vaults to hold 7,835,317 troy ounces of gold. By shorting 50,754 contracts in just five days, The Bullion Banks effectively shorted about 65% of the total Comex vault.

It gets worse. By adding 50,754 new naked shorts to their pile, the Gold Banks are now gross short 273,085 contracts of paper gold on the Comex. Applying the same math as above nets a short obligation of 27,308,500 troy ounces. And what does the CME Group state as the total amount of gold in the Comex vaults? Just 7,835,317 troy ounces. Therefore, The Bullion Banks are now short about 350% of the total, available supply in the Comex vaults. If you want to really be disgusted…The total Comex registered vault is just 372,631 troy ounces. That's only enough gold to physically settle 3,726 contracts. However, as stated above, The Banks are gross short 273,085 contracts. That's a "leverage" of over 73X. And you wonder why I use words like "grotesque" and "criminal".

And we haven't even discussed silver yet…where the numbers are just as bad if not worse. For the week, silver was up $1.21 through last Monday before being forced 66¢ lower on Tuesday to finish +55¢. This was almost entirely due to an epic short squeeze on the Large Specs…NOT new spec buying. The Large Specs added 2,900 new longs but they covered over 19,000 existing shorts.

Rather than stand idly by and let the market reach a new equilibrium where buyers and sellers meet, The Silver Banks (namely JPM), issued 18,595 new naked shorts. As before with gold, let's do some math.

  • 18,595 new short contracts at 5,000 ounces per contract is 92,975,000 troy ounces of paper silver
  • That's 2,900 metric tonnes
  • About 11% of total global mine supply

Again, when we compare these numbers to the existing Comex vaults, you're likely to get pretty angry. As of last Friday, the six CME-approved Comex silver vaults allegedly held 178,765,000 ounces of silver. The new, record-breaking total gross short position of The Silver "Commercials" is 125,035 contracts or 625,175,000 ounces…again about 350% of the total vault. Put another way, in terms of total annual mine supply at 877,000,000 ounces, the Silver Banks short obligation is now over 71% of total annual mine supply.

I'll say it again…sickening, grotesque and criminal…and this is how we value and price precious metal.

Well, the good news is, not for much longer. If you haven't yet listened to our latest Jim Willie interview, please do so soon. You should also be sure to read this great article from our pal, Koos. Pay particular attention to the phrase "break the barrier between 'commodity' and 'monetary' gold". Hmmm. What do you think that means?

https://www.bullionstar.com/blogs/koos-jansen/xinhua-china-sets-up-gold-…

Anyway, we'll begin a new week on Tuesday and I invite you to join the fun here at TFMR. We're all in this together and its definitely going to get much worse before it gets better. So, c'mon in. The water's warm. The end of The Great Keynesian Experiment is upon us. Be sure you are preparing accordingly.

TF

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