Friday, October 11, 2013

The CME/Comex And Truth In Reporting

The information in this report is taken from sources believed to be reliable; however,  the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness.  This report is produced for information purposes only.
The above legal disclaimer mysteriously, and with no explanation, showed up one day on the Comex gold and silver warehouse stock reports about 8 months ago (roughly).  After several years of publishing the warehouse stock reports, why all of a sudden did the CME feel compelled to stick this disclaimer specifically on the gold and silver warehouse reports?

I bring this up because I was having a discussion with a couple of long-time colleagues about the unprecedented level of manipulation of gold and silver that is occurring specifically on the Comex and primarily during Comex trading hours.  Today's activity is a perfect example.  And the behavior of the price action in the paper Comex market completely defies the unprecedented amount of physical gold being bought for accumulation by Asia, Russia and the Middle East.  In fact, India and China together are on track to inhale more gold in 2013 than is currently being produced by every single gold mine globally this year.

The nature of the discussion had to with the fact that, according to the CFTC Commitment of Traders report (COT), the four biggest gold futures traders on the Comex are, and have been, net long a record amount of gold contracts.  In an ordinary, unmanipulated and uncorrupted system, that positioning stance would be extraordinarily bullish.

But my view is that the data being reported by the CME/Comex and the CFTC is not to be trusted. In fact, if we could get a completely independent audit done of the CME/Comex, I think we would find a fraudulent horror show there beyond anyone's imagination.

But then there's Ted Butler.  He'll tell anyone who wants to be spoon fed by his drivel that the CME/Comex numbers are 100% accurate and there's no fraudulent reporting.  And it's pure speculation on Ted Butler's part that it's JP Morgan who's long Comex gold futures - he's the originator of the idea.  I place a heavy discount on anything Butler speculates on that I can't verify with my own eyes. 

The other BIG problem with basing analysis the way Butler does - and he unbelievably puts full faith in the notion that the CFTC/COT reporting is accurate and honest - is that I do not trust the data that is reported by the CME or the CFTC.  The CFTC COT report is based on the data it gets from the CME.  The CME bases its reports on the data it gets from the banks.  Obviously the CME recently put a legal disclaimer on the data coming from the banks.  But then again, Butler has to maintain religious-like faith that the CME/Comex reports are not fraudulent because he makes a healthy living selling newsletter subscriptions to his newsletter that is based on analyzing that data.  He has no choice but to believe the data is uncorrupted.

IF the banks are honestly reporting the CME data, it would be the ONLY aspect of their financial reporting that is being done honestly.  The irrefutable laws of probability would suggest that the CME/COT/open interest reports are fraudulent, just like every other aspect of the Comex.  Let's take JP Morgan as an example.  In it's latest earnings report released today, it reported that it is taking $9.2 billion in pre-tax legal expenses this quarter.   This is $9.2 billion that JPM is forced to spend to defend itself from the very type of fraud and corruption in every other aspect of JPM's trading and banking business that Ted Butler says does not exist with respect to JPM's reporting of its trading positions and its gold/silver warehouse stock on the Comex.

I know that myself and several other long-time precious metals and financial market professionals are confident that JPM's warehouse stock report is full of fraud - that most of the gold/silver it reports is  either not there or is sitting there but has been hypothecated in some form.  It would be a mistake to overlook the fact that the MF Global bankruptcy and fraud case - with which JPM was intimately involved - has set the precedence in terms of protecting banks who hypothecate customer assets.  I highly suspect that the daily open interest positions reported by JPM and the other banks is also corrupted.

If Ted wants to believe that the CME/CFTC/Comex data is accurate and honest, I have a bridge that I own that connects the upper east side of Manhattan to the borough of Queens that I would love to sell him.  What's your bid, Ted?  And, just for the record, I was highly critical of Ted's undying view in the early 2000's that eventually the CFTC would crack down on the obvious manipulation of gold/silver on the Comex by the big banks and specifically JPM.   He was wrong then and he's wrong now.

That tragedy of all of this is that the crime/corruption/fraud on the Comex reflects the same on all of Wall Street and, in fact, our entire political and economic system.  This country's "wealth" has been built on the back of the giant Ponzi scheme that is the U.S. Treasury market and the $17 trillion in debt that has been issued to keep the system alive.  In other words, our entire system of economics and politics is one giant facade of complete deception.  And I'm not even addressing here the massive insolvency of the cities, States and public/private pension funds.

This will not end well.  The volatility exhibited by the economy, the stock market, the political situation in DC and in the gold and silver markets - especially the latter - reflects just how broken and corrupted our system is.   Try to enjoy what you can, while you can - because there's no telling when the inevitable occurs and life becomes extraordinarily unpleasant for everyone.


  1. Here is where you are wrong about the banks not reporting legally. In 2009, at the "urging" of Congress, changed FASB 107 to allow "mark to fantasy" accounting for illiquid toxic assets.

    Voila: not a problem.

  2. Cash-strapped AlphaMetrix losing role with CME, NFA

    CME Group Inc. and the National Futures Association are dropping Alphametrix from its role of checking daily balances futures brokers are holding in customer accounts after the Chicago-based company said it was having financial problems.

    Alphametrix was hired to help launch a program to improve futures customer protections after the bankruptcies of Peregrine Financial Group in 2012 and MF Global in 2011 rattled confidence in the futures industry. The now-defunct brokers dipped into customer segregated accounts in violation of industry rules.

    AlphaMetrix's problems could hurt the reputations of CME, the largest U.S. futures market operator, and the NFA, which hired the firm as part of a drive to boost customer confidence by improving oversight and transparency in the futures industry.,0,1420107.story

    “Sed, quis custodiet ipsos custodes?”

  3. Dave,

    Who/what to believe? GS just came out with a slam dunk sell gold report. JPM a few weeks ago said they were going long gold, right?

    But the real question to me, is if Russia/Asia, etc are accumulating and buying as much as they can get, seems they are more than happy with the continued manipulation, correct? Otherwise, wouldn't somebody with the balls of Putin come right out and say stop messing with the gold price? I know this is very simplistic, but it keeps coming back to, at least medium term (I think 2 years of smackdown is certainly medium term) I and every other precious metal and miner bull have had their asses handed to them. Geez, GDXJ is down what, 35% in a friggin month? From the day I started work in 1989, I would have been better off to put 50% in cash, 50% in gold, and not even learn what the stock market was about!


  4. one for the professor

    Across the 19th century as the nation industrialized, these elementary republics lost power to the states, federal government and corporations. Political economic power increasingly concentrated in DC and in centralized industrial corporations. Thus the most amusing aspect of America’s anti-statists is their refusal to recognize the necessity of the growth of DC for the growth of their favored corporate conglomerate. Though pro-statists, liberals particularily, never had much difficulty with that. The great liberal Democratic moment that dominated American politics for a half-century, the New Deal, was a simple acceptance of the DC/corporate conglomerate partnership. The professor, for all his democratic empathies was a liberal, though with an understanding liberalism and democracy were never necessarily synonymous. He once imparted the New Deal wasn’t much more than “a compact between the oil companies and banks” — ho ho, lot of truth to that. And if you don’t believe that, take a read of Arthur “the eternal liberal recurrence” Schlesinger’s 1956 piece, Liberalism in America — Phew, American liberalism was always mighty thin gruel to fuel a healthy body politic.

    Which brings us to the much more interesting part of our latest DC “crisis,” the Republicans’ threat to default. Unfortunately, as it now plays out, this is simply just another aspect of the 20th century debate of the role of the state. However, this an opportunity, a “teachable moment,” on the question of money. The money question has been removed from political debate for over century, that folks is power. And if you want to understand, and you should, the last great debate on money in America, read the professor’s The Populist Moment: A Short History of the Agrarian Revolt in America, one of the great works on American history. The Populist Momentshows the last fight for control of our present money system. A fight between what remained of our yeoman farm democratic republic and the new banking system and their debt-money. The banks won. Their power soon institutionalized with the creation of the Federal Reserve in 1913. A staple of 19th century politics, questions about money in the 20th century became relegated to cranks and various conspiracy theorists. Again, that’s real power.

    In the last several decades, the bank debt-money system has changed. There is no longer as profitable correlation between the creation of debt and economic growth. Ever greater amounts of debt are not leading to greater economic growth. There are many reasons for this growing failure including; the end of the era of cheap oil, the growth in consumption debt, and fully established industrialized societies simply don’t experience, that is, they don’t need the levels of growth of an agrarian system first industrializing, such as the US did when the bank debt-money system evolved in the 19th century. Today, ever more debt and the Fed’s protection of bad debt, simply upholds a failing status quo, constraining every aspect of the system while further indenturing the majority.

  5. Sandoval: Nevada faces catastrophe if government shutdown persists - Oct. 8th 2013

    "Gov. Brian Sandoval said today Nevada is in danger of “catastrophic” consequences if the federal government shutdown persists until the end of the month."

    [Problem is that it's been a catastrophe for the last 2 years here but, as long as states can keep up their ponzi scheme while dishing out salaries increases to the top brass while the middle class works 8.25 hour part-time, everything is OK. So....SHUTDOWN! SHUTDOWN! SHUTDOWN! YEEAAAH! ]

  6. Thanks for posting your updated thoughts, Dave.

    My distilled thoughts about the current, vigorous attempts to manipulate the gold market, are that the increase in blatant manipulation of the paper price is directly proportionate to the fear present in the minds of the manipulators. In other words, the recent spike of shennanigans is actually quite a positive sign for those who understand that it is not IF, but WHEN they lose control of the market completely, and it becomes a purely physical market.

    As you point out, the claims of available (free and clear) bullion – even taking into account the remarkably low the levels of COMEX and JPM inventory – are almost certainly fraudulent. This, in turn, suggests that the recent, frenzied efforts to depress gold prices are not simply about defending the dollar, but perhaps a desperate effort to prevent the curtain from being pulled away and the fraud exposed.

    I have a very difficult time imagining that the criminal charade can continue much longer.

  7. Why don't you want to be short miners? They are in liquidation, high grading and not replacing reserves?

  8. Your blog is one of the very few that shines a light into some very dark corners - and amply fulfils the last sentence of your "About Me". Keep up the good work, Sir!

  9. Question for you Dave,
    You may have mentioned this earlier or I may have missed it, so pardon me if this question was answered earlier.
    I had read somewhere that China bought a gold mine or two in Australia.
    Have you seen or heard of China buying up gold miners (junior or otherwise) recently?
    Thanks for your reply, for your patience with us curious gold bugs, and a Big Thanks for your blog.

    1. Australia, Africa, South America. China is buying up natural resource assets all over the world. Especially Africa.

  10. Here's a crazy theory, Dave. Is it possible that the suppression of gold is the work of China, which has threatened to start dumping US treasuries if the Americans do not comply? In other words, we want your gold and we want it cheap.....if you don't play ball, we'll do a number on your economy using your debt as a club. Just a theory.

    1. No but I'm sure China rides the coattails of the Fed in pushing the market lower in order to shake out as much physical as they can.

    2. My partners and I met with a guy here in Denver who spent many years at NEM and now has his own mining consulting business. He said he bumps into the Chinese all the time in Africa and S America.

  11. Dave,
    1. The Comex added the disclaimer at the beginning of June. That's not "8 months ago".
    2. I think the cartel is eyeing the $1000 level and a negative close for the entire year in the hope of dampening the sentiment in India and China. Therefore, we shall have to wait till 2014 to see if the price movements will get better.
    3. You really need to have a vacation.

    1. LOL. June/January - what difference does it make? The fraud has been going on for years and the disclaimer just went on this year? Why all of a sudden?

      You don't understand much about this market if you think the cartel could POSSIBLY have any hope of dashing sentiment in China and India. Do some real research and figure it out for yourself - that's the best way to learn. I'll just say that the lower the price goes, the more China buys. They imported 300 tonnes into China in August.

      Vacation? You need to start your own blog so you can air your own views for everyone else to inspect.

    2. Yes, the fraud has been around for years. I don't think it's any coincidence that the manipulation of the metals has become exponentially worse since the Fed allowed the cartel banks additional latitude in the commodity markets. It should be no surprise that the fraud has mushroomed as a result. I remember seeing that CME disclaimer this summer and laughing my ass off. As William Black would say, the best way to rob a bank is to own one. Unfortunately in this case, the criminal banking establishment is working to grab not just the banks' assets, but everything that's not nailed down, whether it be your investment in the gold market, your pension or whatever else they can get their hands on.

    3. Dampening the sentiment for gold by India and China????? Owning gold is in the blood bones and DNA of most people in India (except for India's Fed and Wall Street gang, and I do mean gang). A guy from India told me that a family in India would give up eating breakfast for a whole year just to save up enough to buy one gold coin. Do you think Wall Street could dampen the demand from gold buyers like that? The Chinese learn from history, especially their own, doubly especially the Chinese experiment with unbacked paper money centuries ago. Why should the Chinese Government sit on trillions of US Treasuries and be at the mercy of DC politics when it can aquire gold at cost (thanks for the info Dave) and have a currency backed by yellow metal instead of a currency backed by the word of a disfunctional US government? There is a new "Great Game" going on, with China and Russia moving into the asset that has been trusted for more centuries than I care count. Gold to lose its shine because the banksters and Da Boyz on Wall Street sez so? Gimme gold ANY day of the decade and tell Da Boyz to go rob from somebody else.

  12. Dave outstanding stuff as always, I remain very conflicted by the asserted large long position Turd has been standing by his forecast that we will see a turnaround by the end of next week. This is based on the supposition that the 70K long contracts that JPM holds (mainly in Dec) will thus create the motive for the gold price to move up. Now based on a lot of other data it looks like the Chinese and Indians alone are now sucking up every oz. being produced and them some. One could suppose the physical is getting thin. So who knows I could see JPM wanting to be long it beats being short and IMO just as easy to manipulate the market as being short.

    Also what's your take on the complicity of China with the cheap PM prices? I have read a few articles stating that they have agreed to limit the dumping of T-Bonds in exchange for manipulated cheap gold. U.S. wins by keeping the gold price down and supporting the dollar and at least inhibits the dumping of Treasury paper and China gets cheap gold.


    1. When I saw that JPM - or some combo of the big 3 bullion bank Comex market makers - were net long gold - assuming the CFTC-generated, bank-sourced data is accurate - my first instinct was to assume they would use that as ammo to dump contracts w/out getting net more short.

      They know the Comex gold futures paper is largely unbacked and therefore largely worthless. IF JPM is accumulating a long position in gold, it's in the physical market. And because disclosure is about as secretive as it can get in the physical market, we'll never know til we see it with our own eyes.

      All else is speculation.

    2. As for some agreement that occurred between China and the U.S. regarding Treasuries/gold - that's pure idle speculation as well. I highly doubt it exists. The U.S. is to the point of desperation on all fronts that it is resorting to the "Hail Mary" strategy in all the markets. The extreme and blatant manipulation going in the gold market reflects this desperation.

      I don't know about by the end of next week, but it won't be long before the metals start a massive move higher.

  13. The writing is clearly on the wall for all to see. Now it is up to every person over the age of 18 to choose what they stand for and want to believe.The information is out there for all to be able to formulate truth.

    The problem with people of the United States of America who are 18 years of age and older is they have been given way too much in the way of credit and other hand outs . That coupled with the great job that the U.S. media has and is doing to keep the mass population amiss .

    Unfortunately many an American will feel like they are being slammed one day by a 2x4 straight in the face as a result of facing extreme poverty.

    Unlike countries like China and Russia and India where the pain has been felt , many a citizen are loading up on physical gold and silver knowing the importance of how those assets will play an important part for survival one day.

    The likes of the CME (crime made easy) should be burned at the stake right now for the deceitful actions that they take while at the same time work hard at looking so official.
    The CFTC is nothing but a joke - a phony entity by all measures.

    1. Xinhua
      Commentary: U.S. fiscal failure warrants a de-Americanized world
      By Xinhua Liu Chang

      BEIJING, Oct. 13 (Xinhua)

      Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.

      As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.

      Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized.

  14. Big Four consulting firms and the conflicts of interest

    Max interviews Francine McKenna of about the Big Four accounting firms morphing into the Big Four consulting firms and the conflicts of interest that have arisen as a result.

  15. I don't accept anything the COMEX says as gospel, regarding metal in inventory, of either category. I was dismayed several years ago to see Butler, with whom I have spoken by phone once, saying in print, that he'd accept on face value the silver etf has any amount of 1000oz bars, if it would only show a list of serial numbers. Hell, I could concoct as many serial numbers as any science fiction fan could get high on. It's like a title to a car, with no auto to match.

  16. I found the "United States Senate Democrats" website and of course they have posted "The Republican Government Shutdown" with a countdown timer.

    The problem is their countdown has 12 days 21 hours 38 minutes (on Sunday 13th at 9:35pm PST). What do they know that we don't? Could they be sending a message that we could actually keep going till Oct 25 or 26th?

    Dave, your countdown is correct - if we are even close to being told the truth from DC.

  17. Next Step In Dismantling The Dollar And US Credit Hegemony

    So Villepin built his argument. Cheap credit led to a bubble in private, corporate, and public debt – the “global debt disease,” as he called it – that “artificially” created economic growth. The buyout fever hollowed out entire industries and left even the most efficient firms more fragile. And when the bubble blew up, the Fed flooded the market with even more liquidity. “A danger in the long run,” he said. “Instead of limited multiple bubbles, they have created a giant worldwide bubble.”

    Credit has become “the key for the central nervous system of the economy,” he said. “Those who control credit, control the economy. Those who control risk control the credit. And those who control information control the risk.” That’s why credit ratings agencies – an American monopoly – have such enormous power.

    The US reacted to the crisis by “clinging to the control of credit through its sole privileges, making them even more dangerous,” he said. The Fed “flooded the markets with fictitious money” to keep the US economy afloat. Banking reform in the US and Europe “created a club of well-behaved aristocracy” and “benefitted the restoration of the banking empires in London and New York.” And the continuing public deficits in developed countries are financed through cheap credit “based on their version of risk.”

    He called for “a new architecture for the world’s finance and economy,” whose foundation would have to be “a reform of credit” and “a new currency exchange system.” It would end the principle of one “hegemonic currency” due the “obvious conflict of interest between the nation controlling the currency and the need of the world using it.” He already saw that “the hegemony of the dollar” was dwindling. But rather than an alternative currency, he saw a common world currency unit, calculated off the dollar, euro, yuan, and yen (he’d forgotten to ask Russia, Brazil, and India, apparently).

    And he called for the creation of “the tools that will vouch for a more balanced circulation of credit around the world.” Most prominent among them: a new credit rating agency. “The three big agencies failed in their mission in 2007 and 2008 because of their methodologies and conflicts of interest,” he said. “Today we need new actors,” that would “create the new international system.” Hence his solution, Universal Credit Rating Group. Quoting Dagong Chairman Jianzhong, he said, “The system as it exists cannot go on. We cannot wait for America to reform it.”

  18. "The stock market…a place where rationality has been thrown out the door in favor of trading for immediate profits…profits based on what the government and Federal Reserve are planning to do next. It’s no longer a place for average investors to make money, as the fundamentals that drive key stock indices like the Dow Jones Industrial Average (INDEXDJX:.DJI) and S&P 500 (INDEXSP:.INX) higher don’t really matter anymore. The notion has become “If it’s good news, buy! And if it’s bad news, then buy even more!”

    We have been witnessing this phenomenon on key stock indices for a while now, and from my experience, such erratic behavior by the stock market usually comes at the end of a long up or down cycle.

    Hold on a minute!

    Why did the S&P 500 jump so much on the Republicans saying they would put in a temporary new U.S. debt ceiling instead of debating it? Isn’t increasing the U.S. debt load bad? After all, we are the biggest debtor in the global economy."

  19. Two good article links there - thanks!

  20. Big groupthink here. From qe4 to no taper and a government in turmoil and ur beloved gold goes down. Everytime it goes up by 40 or so all bulls make idiots of themselves and pronounce a moonshot. Its all drivel and no power there4 no action. Keep dreaming.

  21. Currency Manipulation and Derivatives
    Traders can’t make huge gains without having a huge source of funds to finance high-risk speculation. Thanks to the largesse of U.S. taxpayers and lax regulation at U.S. banks, we’ll continue to see speculation and manipulation in all markets. Banks are “rogue trader” factories.

  22. N.Y. Fed Moves to Seal Documents in Ex-Bank Examiner’s Suit

    By Jake Bernstein, ProPublica

    A federal judge in Manhattan is pondering whether to grant the request of the New York Federal Reserve to seal the case brought by former senior bank examiner Carmen Segarra.
    As reported by ProPublica last week, Segarra filed a lawsuit against the New York Fed and three of its employees alleging she had been wrongfully terminated last year after she determined that Goldman Sachs had insufficient conflict-of-interest policies.

    On Friday, the Fed asked for a protective order to seal documents in the case as well as parts of the complaint. In a letter to U.S. District Judge Ronnie Abrams, New York Fed counsel David Gross said the information should be removed from the public docket because it is “Confidential Supervisory Information,” including internal New York Fed emails and materials provided to the Fed by Goldman.

    “These documents show that at the time (Segarra) left the employ of the New York Fed, she purloined property of the Board of Governors of the Federal Reserve System,” Gross wrote, citing Fed rules that prohibit disclosing supervisory information without prior approval of the Fed.

    Gross argues that the Fed’s obligation to keep bank supervisory records secret outweigh the public’s right to know. “The incantation of a 2018 public right to know’ cannot ever be a license to discharged employees that they may violate Federal law simply by filing a complaint in Federal court,” Gross wrote.
    Segarra and her lawyer could not be reached for comment.

    While Abrams considers her decision, Segarra’s lawsuit and appended documents have been removed from Pacer, the online records system for federal courts. The complaint and related documents are available via links in ProPublica’s story and have been published elsewhere online.

    Gross states in his letter that Segarra previously made a $7 million settlement offer. The Fed rejected it.

    The New York Fed has historically been one of the most opaque financial regulators and maintains that it is not subject to the Freedom of Information Act because it is not a public agency.