Gold and silver probed their November 2014 lows early last week and finished strong. From a chart standpoint, they both put in outside reversal weeks to the upside. I’d like to visit the current “setup” in gold and silver from several angles and then take a step back and look at them from a very broad view.
The latest commitment of traders report, out this past Friday (and with data through Tuesday) shows a picture which has changed dramatically over the last few weeks.
GOLD
-The large specs reduced long positions by 9,553 contracts and increased shorts by 19,246 contracts.
-The commercials increased longs by 25,886 contracts and reduced shorts by 6,966 contracts.
-The small specs reduced longs by 816 contracts and increased shorts by 3,237.
You will notice the giant movement in sales and even larger shorts put on by the large and small speculators. The specs dumped over 1 million ounces and went short another 2.25 million ounces. Totaling these, speculators altered their position by over 3.25 million ounces in just one week. On the commercials side we saw the opposite. They bought almost a net 2.6 million ounces and covered almost 700,000 short ounces for a net decrease of short exposure by about 3.3 million ounces.
I point this out to you for several reasons with a couple of caveats. The caveats being, COMEX is a playground where the charts are painted with paper brushes, very little metal actually changes hands and the total amount of gold claimed in inventory is less than China and India import in a month …EVERY month. Another aspect is we don’t really know if these reported numbers are real. How do we know this? Because CME group told us so, over a year ago they basically said they cannot verify the numbers and rely on the individual reporting firms for data. “Imperfect” to say the least.
These are HUGE moves and their “size” tells me something is happening or going to if the numbers are real. The sentiment shift has been huge with the specs confirming the negativity in the air. I know of no other previous time where sentiment for gold and silver have ever been worse, including the major bottoms in 2001 and 2008. Another reason to point this out is because even though we are not at all time record levels, the specs have not been less “long” nor the commercials less “short” since November of 2013, prior to this I believe was late 2008.
While on the subject of COMEX, we have also noticed something else very strange. February which is traditionally a very active delivery month, saw very little delivered even though open contracts just before first notice day were huge and outsized. March on the other hand is a very small delivery month, yet HUGE amounts of gold have left their vaults in just the first three weeks. I don’t know how to explain this other than to say, “someone wants or needs the gold”.
We have also mentioned several times in the past that movements within the COMEX have been showing as “kilo” movements. Much of what is being reported are “000” weights and divisible by 32.150. COMEX threw us another curveball on Thursday when they began reporting a new “kilo gold” contract. I had no idea this was even being contemplated and had not seen any news prior. What’s quite interesting is in just two days they reported the inflow of close to 700,000 ounces of gold. ALL of the gold came in as “eligible” and none as “registered”. The other oddity is the fact the reporting DID show “.xxx” (numbers) as opposed to (“.000”) triple zeroes. It appears kilo bars are moving within the 100 ounce category on COMEX while ounces are being moved in the kilo category. COMEX now creating a kilo contract cannot easily be explained, this for me is a head scratcher and would love to hear theories on “why”?
Switching gears, the biggest topics currently are Greece, Ukraine and the new AIIB bank in Asia. I plan to write further about the AIIB tomorrow because the U.S. has been outflanked and has folded as even the IMF will now join. Greece and Ukraine are two hotspots for very different reasons.
Greece’s continued participation in the Eurozone is now being called a 50-50 proposition by none other than George Soros. I look at it a little differently and put the odds far higher that Greece will exit unless someone can show me where exactly the money will come from? Will Germany fold and give in to Greece’s WWII reparations demands? I don’t know the answer to this but I do know it is THE only source of cash for Greece which comes with no “strings attached”. By “strings” I mean money that will need to be paid back in the future. I just do not see any viable way for Greece to remain solvent and stay in the Eurozone. It is my opinion Greece will fall into Russian (and the East’s) arms.
Speaking of Russian “arms”, though you may not be hearing much via mainstream media, the West/East saber rattling is frenzied like never before. The Iranian nuclear talks have broken down and Russia has vowed to protect both Iran and Syria. This at a time NATO has been sending troops and machinery within spitting distance to Russia’s borders. There was also some muscle flexing with a test fire of an ICBM over the weekend and the “big ship” are now moving toward the Persian Gulf.
Whether you see it or not, the U.S. has not “isolated” Russia as was the plan. The U.S. has now succeeded in isolating ourselves, I will talk about this tomorrow. China has attracted a long list of “charter members” for their international infrastructure banks which includes Britain, Germany, France, Italy and the IMF with Japan and Australia waiting in the wings. Could our self imposed isolation be any more obvious!?
Hi Bill,
Cannot wait to read your daily (almost) article, well written with much thoughts behind every articles.
Very intriguing the new Comex gold “kilo” contract (minimum 9999 fineness) with HK delivery, this contract is designed to meet the needs of the Asian bullion marketplace. Could be with the gold moving east they are trying to capture a part of that market? not sure, look forward reading comments on this one.
It seems they announced it at the beginning of January of this year:
http://www.prnewswire.com/news-releases/cme-group-announces-the-launch-of-physically-delivered-gold-kilo-futures-300016010.html
I find a succinct description of the contracr from the CME Group:
http://www.cmegroup.com/trading/metals/files/gold-kilo-fact-card.pdf
Kind regards,
Daniel
I would love to hear comments, surely the contract was not created to “give” gold away?
COMEX Background.
Dow Jones and Company sold to NewsCorp then headed by Rupert Murdoch, December 13, 2007 for 5 billion dollars.
In February 2010, NewsCorp sells 90% of Dow Jones Indexes to the CME Group, owners and operators of the COMEX.
The Chicago Mercantile Exchange (CME) now own COMEX, NYMEX Holdings Inc., Dow Jones Indexes with the S&P Dow Jones Indices, in a joint venture with McGraw Hill Financial, CME Group and NewsCorp.
It is interesting to note here that the CME Group is the world leader in derivatives, including futures.
Some ‘bedfellows’ of the above are the CPM Group, which is owned by Omnicom Group, a worldwide marketing and communication conglomerate and GFMS which is owned by Thompson Reuters.
With just six worldwide giant corporations controlling 90% of the Main Stream Media and what we see, hear or read, the stranglehold of the 1/10 of 1% over the general public is
complete. To take an in depth view below the surface of the absolute corporate collusion, corruption, cesspool, is to see the inter-connectiveness of it all. Rotten to the core.
yes, very ugly under the sheets.
Greed, corruption and manipulation.
Is that all we have to show for the last 60 years of leading the Western World…..
On the surface it does look like the USA is no longer the land of the FREE.
The East must love watching our sins take us down.
On another subject. I see that Andrew has his home in Miami for sale.
I love Miami…been there many times.
I have read that many there are selling their homes and moving from there before the war between the HAVES and THE HAVENOTS breaks out.
Our World is changing before our eyes.
every day.
Almost all day today “the gold price” has fluctuated between exactly US$1197.40 and US$1197.99…this is a RIDICULOUS FARCE. Paper tail wagging massive demand for real metal.
With absolutely EVERY metric pointing to soaring demand, and every macro-economic signal saying the same…?!?$?
CRUSH the Comex! But how? And more importantly, when…?
…when the metal runs out.
Every Ponzi ends..
This paper vs physical game will end soon enough.
As soon as the risks overwhelm the potential for profit the game will end.
Just give the new Asian physical trading exchange a few months and they will likely overrun the paper charade.
yes.
Hi Bill,
Good discussion as always. I firmly believe that there should be no merit placed on any charts. The entire system is rigged, and using charts in my opinion to support a position is inconsistent with reality.
I do believe using data however is beneficial and prudent, although much of it may be questionable, it is still a better measure or broadcaster if you will of the game.
Thanks
even the data may be corrupt.
Apparently Alan Greenspan has this all programmed into one computer and is gona push one button this fall and torch the dollar returning us to the gold standard. I heard that on greg hunter by box wire yesterday. So why worry about anything. We have no control and should simply buy gold and silver. Why pay any attention to the cot data if criminals are giving us the numbers? Just thinking out loud. Thanks frank
correct but the sentiment reached an extreme.
Bix Weir
Bill – I had a gold bullion broker tell me that gold’s recent rise is due to backwardation. Does this explanation tie into your article?
it could but we no longer get GOFO rates published.
In regards to your question: COMEX now creating a kilo contract cannot easily be explained, this for me is a head scratcher and would love to hear theories on “why”?
This is just my speculation, but here goes: First, the Comex is primarily a paper market. The Western standard used to be the 400 oz bar and the paper contracts reflected this. But the world is changing and the East, primarily China, prefers a smaller standard known as the kilo bar.
When the system is changing, slowly, from one standard to another there are incremental steps that need to be taken. So introduction of the kilo contract gets Western traders (and the supervisors/managers/directors) to start thinking in kilo’s versus ounces. With Americans still far behind in adopting the metric standard this is a targeted education effort to switch the thinking from one size of metal to another. Plus all the supporting computer programs need revision to the new standard. Internal report formats need to be changed and oral reports to management will require some practice.
He who has the gold makes the rules and one of the rules appears to be to report in kilo’s, not troy ounces. The standard today of dollars per ounce is going to dollars per kilo and then to yuan or rubles per kilo (or whatever flavor of fiat per kilo comes along).
As to the item “We have also mentioned several times in the past that movements within the COMEX have been showing as “kilo” movements.”, this may be an early fumbling attempt in the ounce to kilo conversion. Since the Comex numbers are only reference and may or may not reflect any reality, some trading desks might be reporting in kilo’s now. This change from ounces to kilo’s may at time resemble trying to herd cats and we are still in the early stages.
Also, since the JPM vault next to the Fed is now owned by Chinese entities, they may be more comfortable in thinking of kilo’s and the other banks are still switching over. I do not know if this means the former JPM vault is filling with Chinese kilo bars or not. I wouldn’t be putting real bars in the US right now except for perhaps a few show and tell types. If or when the rule of law returns that may change. But NY courts and American politicians currently make storing real metal in a secure vault extremely chancy.
Just my 2 cents on the topic.
still doesn’t really make sense, China is importing the equivalent of the entire COMEX inventory each and every month!
It isn’t about real metal, just how the metal is described. With the Eastern system for trading about to go live, which will be done in kilo contracts, this allows easy comparison of a kilo contract in NY with a kilo contract in China with a kilo contract in Berlin or Moscow.
Plus, the current 400 oz standard is really cumbersome since the typical 400 oz bar is plus or minus several percent. The bookkeeping goes from three units to 0.97 plus 1.01 plus 0.99 units and 2.97 units is not 3 units (except in the new math which I assume China is not on board with).
COMEX trades 100 ounce bars, London trades the 400 ouncers.