Well, the Commitment of Traders Report lived up to its advanced billing...especially in silver. In silver, the bullion banks decreased their net short position by an incredible 16,446 contracts...which is 82.2 million ounces. I've never seen a 1-week change this large in silver, ever! The net short position in the Commercial category declined to 121.3 million ounces. It's been many years since the Commercial net short position has been this low.
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The '4 or less' bullion banks are now short 159.7 million ounces...and the '5 through 8' Commercial traders are short 42.9 million ounces. So these eight traders combined are short 202.6 million ounces of silver, which is 167% of the entire Commercial net short position. If these eight Commercial traders disappeared, the remaining Commercial traders [Ted Butler's raptors...all 34 of them] are massively long the silver market, just like everyone else.
In gold, the Commercial net short position declined by 30,945 contracts...or 3.1 million ounces...and is now down to 16.7 million ounces. Like silver, it's been many years since the Commercial net short position in gold has been this low.
The '4 or less' Commercial traders are short 15.3 million ounces...and the '5 through 8' Commercial traders are short 4.1 million ounces. These eight Commercial traders [almost all of them bullion banks] are short 19.4 million ounces of gold, which represents 116% of the Commercial net short position.
Just like in silver, if these eight traders vanished, the remaining 41 traders in the Commercial category are net long the gold market.
What's even more incredible is the fact that since the Tuesday cut-off, there has been a further 20,000 contract decline in gold open interest, just on Wednesday and Thursday alone...plus further declines in silver open interest as well. I'm only guessing here, but I'd say that the true COT numbers are actually much better than yesterday's report indicate.
But, as Ted Butler has been hammering away to me on the phone all this week, the fact is that the real reason the price declined was because of paper trading on the Comex...and it had nothing whatsoever to do with real-world supply and demand fundamentals. Eight [and probably much fewer] traders in gold and silver control the price of both these metals...and that's flat-out illegal. They hold a short-side corner on these two markets. The tail is wagging the dog, as there is no true price-discovery mechanism allowed to operate in these markets. Can you imagine how fast the CME and CFTC would react if eight or fewer traders had a long-side corner on any commodity??? Ask the Hunt brothers and you'll find out...and they didn't even get close to the position sizes that JPMorgan et al, hold. Then there's the Sumitomo copper case...but I don't have time to get into that here.
I haven't posted Nick Laird's Days of World Production to Cover Short Positions graph in quite some time, so here it is now. Please note the red bars in particular. These are the '4 or less' traders in every commodity that's traded on the Comex futures market. Note how the biggest ones are in the precious metals...silver and gold in particular. It would take 82 days of total world silver production for the '4 or less' Commercial shorts to cover their short positions. In gold it's 67 days. All this data was extracted from yesterday's Commitment of Traders Report...and then converted into days of world production for each commodity.
My bullion dealer had a couple of surprises this past week. The first thing was that 100-ounce silver bar delivery times went from one month to two months. I would suspect the rest of his product line in silver will have increased delivery times in pretty short order as well. The second big surprise was that one-ounce gold bars are no longer available...and none of his suppliers are even taking orders at the moment. That has never happened before in the history of his company.
Here's a freshly-updated graph that Nick Laird sent me yesterday. The Office of the Comptroller of the Currency issued their June derivatives report for all U.S. banks this past week. Here are the OTC derivatives in precious metals for the largest fifty U.S. banks...and only three of them hold precious metals derivatives. You can see why JPMorgan and HSBC USA have been at the top of my hit list for years.
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