One For The Ages: Stunning Positions In Both The Gold CoT And The BPR

Includes: GLD, JPM
by: Russ Winter

The latest Commitment of Traders (COT) and Banker's Participation Report (BPR) is one for the ages. This is one to put into the economic textbooks to illustrate just how extreme speculators and slingers can get in a market. Starting with the monthly change in the BRC: The big four U.S. banks [of which the largest by far is JPMorgan (NYSE:JPM)] added an additional 767,400 ounces net long, to bring their position up to 5.741 million ounces (71,897-14,489).

Foreign bank holdings also showed a huge positional swing of net long 2.544 million ounces. Of this, 1.893 million ounces was short covering and in total foreign banks reduced exposure to the gold futures market by about 1.25 million ounces. So combined, the bullion bank complex added a stunning 3.312 million ounces net longs. If I had to hazard a guess, I would say foreign banks are getting the heck out of the way, but the U.S. group -- or specifically JPM -- is interested in a giant short squeeze.

(Click to enlarge)

Table source: CFTC

The CoT data was pretty straightforward. Slingers added another 602,000 ounces to their giant 8,373,000 oz short position, and the producers bought it from them. The producers category now has a long position of 1.23 million ounces, another one for the ages. It is unprecedented for producers to be long gold futures. This chart from shows the record managed money/slinger short position.

Chart source:

This is not business as usual. This paper futures shorting is so heavy and so active that it does have a "Hunts Brothers in reverse" whale tone to it. The trading behavior is bizarre and in the bulls' face, too. There was another big dump seven seconds before the bogus jobs release Friday. From Nanex:

"On December 6, 2013, at 8:29:53, which was 7 seconds before the 8:30 AM scheduled release of the Employment numbers and Personal Income, the price of gold as measured by the February 2014 (GC) futures contract plummeted almost $6 on about 600 contracts traded in 50 milliseconds."

These attacks occur at the thinnest time of day or night, and they are indiscriminate rather than orderly, almost as if someone is trying to break the market. I am surprised that the discussion of these short speculators/slingers is so la-de-dah generic. It's as if nobody is aware of the presence of large, badly off side whales in various markets over the last decade or so. The evidence points to somebody in the managed money camp. And when somebody like me broaches it, I'm immediately labeled by some (not all) as a "conspiracy nut." But WHALES SHOW UP FROM TIME TO TIME AND BADLY DISTORT MARKETS. There is a history of this, it is a fact. And right now regulation and oversight is completely lax. Much of this occurred during the government shutdown.

I don't wish to get into some circular argument as to why the commercials and bullion bankers as a group are so extreme on the other side of this. I don't have direct contacts on their trading desks. I wish I could be a fly on the wall. It seems very tight lipped. If someone has some direct insight, I'd love to hear it. Some may see the presence of a whale and just want to get the heck out of the way or get squared. Others may be more interested in a short squeeze. Personally, I think the whale or whales are being set up. It is the extent that this position been taken that has shocked me.

On other fronts 241,171 ounces was removed from GLD this week. Meanwhile 1,744,600 ounces was delivered on the Shanghai Exchange this week.

The Comex is strange as usual. Notices are being filed, 3849 contracts since first delivery with almost all going to JP Morgan's dealer account. There are still 3136 standing. But nothing ever seems to settle. Everything seems to be in lock down, with IOUs and warrants the name of the game. Importantly there have been zero new deliveries into the Comex warehouse in an active month. Contrast that with Shanghai and ask where the real market is.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.