THE WTF COMEX TRAVESTY
By RUSS WINTER of Winter Actionables
Travesty- n: “a false, absurd, or distorted representation of something.”
Despite the knot in my stomach, I’m proceeding directly to the available Comex forensics. The gold and silver Commitment of Traders report is highly revealing. The data is for Tuesday, Nov. 26, when gold was trading at 1,243.
The settlement price on Monday was 1,222. The managed money boyz, (aka Slingers) have now ramped up their biggest short position since early July’s low at 77,658 contracts (7.766 million ounces). With this week’s net managed money long position down to 15,961 contracts from 34,531, we can see from the report that about a third of this was reduced longs, perhaps from stop hunting. But again, two-thirds of this week’s operation was raw naked short selling.
On the other side of this bizarre trade: Since Oct. 29, the large commercial combined net short position has fallen an extremely large 78,551 contracts (7.856 million ounces) to a near-record low of 28,236 contracts net short. After Monday’s assault, I would imagine the previous July 9 record was broken and these positions are even more extreme.
Chart source: GOTGold
Silver slingers reported a new COT record high 27,808 lots short. The previous record was on June 25 with 26,512 shorts at $19.52 silver.
Chart source: GOT Gold
Once piece of information in the report was particularly stunning. The producer/merchant category, which basically is defined as players (such as miners) who actually produce and supply actual physical gold to the Comex, has gone to 5,960 producer contracts long (596,000 oz). This is unprecedented! As you can see, producers have never been long gold since the series began. Even at the bottom in 2009, they were still short.
The supposed purpose of an exchange is to allow producers to price hedge future production. With the Slingers completely distorting the market, this concept has been abandoned. Turning over a whole new leaf, producers now plan to take gold from someone else. Who that might actually be isn’t exactly clear, as naked paper shorts have no real gold to deliver. A subscriber asked where miners sell their gold nowadays. Good question. It sure isn’t the Comex, nor do I think it’s the LME (London Metal Exchange). Instead, these exchanges shuffle pieces of paper around after speculative attacks. There are six cash delivery markets in the world now, and some offer premiums. Nobody talks about it, but why wouldn’t miners just sell there?
Chart source: GOT Gold
But the 5,960 producer contracts long (596,000 oz) might be a key forensic pointing to something else. Nobody is more likely to bring in the armored trucks and clean out what little registered gold remains in the Comex than a player in an industry that is being completely abused by these paper attacks. Incidentally, there were 590,800 ounces of registered gold left at the Comex before Monday’s paper dump. About the same as the producer longs. Naturally, with 6,770 December futures still standing on Tuesday and this historic revelation about the producers being long, one wonders about what’s up.
Following the sequence of this is a little challenging because these reports are issued in different time zones, on different days and sometimes with a lag. Additionally, the banker’s participation report (BRC) is due out on Friday, and I can only imagine how extremely long the U.S. bullion banksters are at this juncture. Bankers were long nearly five million ounces a month ago at $100 higher prices.
Another report, the number of ounces raided out of the GLD and shipped off to China, sometimes doesn’t update or comes with a delay. There were no redemptions Monday. Tuesday’s report showed that only about 58,000 oz was pulled out of the GLD. That is not sufficient to feed this beast. Over 17 million oz has been extracted YTD and they are down to 27,109,000 oz. The question of the day: does GLD still have this in vaulted physical gold or do they now need to run it down too?
The data for the Shanghai deliveries of real gold tend to show up at its site a little after 4 a.m. EST. Last night, a healthy 369,100 ounces of real gold were delivered.
The registered gold report at the Comex is very convoluted, ad hoc and piece meal. I believe that is because issues are deferred, laxly enforced, given promises and convinced to leave their gold. If a producer who is now long starts asking for gold, it will be an entirely different story, a game changer. This can be tracked here and the low inventory levels are evident enough.
As the Comex opens for trading, the remaining open interest (OI) for December will be reported. Going into Tuesday it as now 6,770. This would would take issue notices and whatever was rolled over to February. The actual issuance tally for the day isn’t reported until late in the evening. Since I need to get this posted, and to maintain some continuity I will have to put that OI number up in the comments section in this post. The same will be true of the daily issue reports going forward, so check back to this post.
These issue report show up late at night and are also sometimes delayed. The one last night was posted at 9:22 p.m. and shows 609 contracts out of 658 (65,800 oz) issued from Nova Scotia to JP Morgan. This is for Dec. 4 delivery.
At the margin, and in perhaps what is a dry run on India’s punitive import fees on gold, Sri Lanka has thrown in the towel and has removed its 100% surcharge. Once the jewelry industry there gets back on its feet, that country can soon be another source of heavy duty gold smuggling into India.
