For the past eight years or so I have had a very good relationship with the U.S. Commodity Futures Trading Commission. My desire was always to keep the channels of communication open though I knew that the Comex was manipulated on a daily basis.
Always the CFTC, through Mathew Hunter (Bart Chilton’s hand-picked protege), communicated with me on all issues. My deal was not to repeat anything said. I honored that. After learning about the exchange-for-physicals mechanism on the Comex, I raised with the CFTC some important issues about them and initially Hunter responded. However, my last two letters to him have not been acknowledged.
I would like to point out the huge difference in deliveries between New York and London. November is a non-active delivery month in gold and we generally witness around 1.5 tonnes delivered upon. However, when you note the amount of contracts transferred it is a whole different story: Last month we had approximately 8,000 contracts of gold open interest transferred to London per day or 180,000 contracts or 1.8 million ounces (560 tonnes). This month it looks like we will have around 9,500 contracts transferred per day or 2 million ounces transferred (620 tonnes). It certainly shows that Comex has a lack of physical metal.
Here are my two letters to the CFTC:
As you are aware, we have been conversing for the past few years on the subject of gold (and to a lesser extent silver) open interest contraction once we approached an active delivery month. You originally offered no apparent reason for this phenomena citing confidentiality to which you were not allowed to divulge to me. You never brought up the use of EFP’s to me as I had no idea that they existed.
When I brought up the “newly discovered” Exchange for Physical” vehicle, you stated that you were well versed in them and not only that but you monitor the private contracts. You stated that it was quite legal to offer an EFP to a long in a private deal for cash and a deliverable verifiable physical product and I have since discovered that almost all of our precious metal EFP’s get transferred over for a London Forward.
I was speaking to James Turk who told me that almost all of these EFP’s remain in London seeking whatever physical they can get a hold of. He informs me that gold and silver are in deep backwardation in price in London and further to that, it is taking 6 weeks- 10 weeks for actual delivery. He suggests that it is most likely that further payments are issued due to the length of time it takes to deliver the physical gold to our longs.
It would be quite easy for a long to sell in London and buy back a new comex gold position in NY and start the same operation again. However this is not happening:.
The average EFP on a daily basis or gold is around 8,000 contracts or so PER DAY. So in one month. one would see 180,000 EFP contracts issued . Over two years, the transferred comex OI volume would be enormous. If these were to come back to NY then the comex OI would be enormous and this is not happening
Thus almost all of these gold EFP longs are staying in London trying to obtain whatever gold/silver is available.
However, while this is going on, the bankers continue to supply massive amounts of paper gold/silver knowing with 100% certainty that there is not any physical to supply.
Obviously we have a huge conflict here coupled with zero transparency. Why are the bankers knowingly supplying huge amounts of paper shorts, influencing the price southbound, knowing full well that they could never deliver upon longs standing.
Why has the CFTC allowed JPMorgan the right to acquire over 600 million oz of physical silver, knowing full well that they are the biggest short at the comex.
The CFTC has stated that the comex is a price discovery mechanism. Do you still believe that you are reporting on transparency in the gold/silver market?
Gold and silver have higher prices in Shanghai vs NY at the fixes. With the fact that bullion bank payments pay our comex longs a fiat bonus, one can suggest that the price of spot comex gold/silver is higher that future prices. The offering of extra cash in London to delay delivery is also indicative of further backwardation and thus scarcity of metal.
I would like the CFTC to address this major issue:
if EFP’s are being used for emergency use (and that emergency use has morphed in a daily occurrence) how do they explain the massive increase in short supply by the bankers knowing full well that they have no metal to supply longs. It is also obvious that the traditional mantra of the banker hedging is out the window
can you please address this for us
Harvey Organ BScPhm MBA
Here is my second letter to the CFTC where I am reporting late entries:
Following my email to you a few days ago, I have noticed strange readings at the Comex.
For example, on November 22 [????] Comex gold reported a loss of 18,949 contracts with a corresponding gain in price of $10.70.
There was also a CME report of 8,101 contracts for exchange for physicals, which give Comex longs a deliverable product that is no doubt a London-based forward. I have been stressing to you that I have witnessed long delays in the reporting of data. It seems that we are having either:
1) Late reporting of open interest even after an exchange-for-physicals has been issued.
Or 2) late reporting of EFPs after final open interest reporting.
You will see what I mean: Here are the last three confirmed comex/CME data reports:
Nov 22: Comex loss of OI front Month (Gold) Nov 22: EFP issued Price gain(loss)
-18,949 +8101 $10.70 gain
Nov 21 -9227 +21,428 $5.10 gain
Nov 20 +28,707 +12,711 _ $19.70 loss
average: 481 gain 42,240 transfer net loss $4.20
Nov 22: +1919 +1231 13 cent gain
Nov 21 -7611 +2998 7 cent gain
Nov 20 +5,388 + 1078 45 cent loss
average: 309 gain 5307 25 cent net loss
If we take an average of the three days, it makes sense. This would be why they are slow in their reporting
The issuance of EFPs does not exactly correspond to a loss in open interest in the front month as the CME is lazy in reporting.
But eventually the reporting of each side of the transaction is done.
This is a big issue and that is why I asked if the CFTC would consider writing an article on this so that transparency can rule. You stated that you would take that under advisement.
As of yet there have been no CFTC comments on the EFP issue.
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