Precious Metals Monthly Bank Participation Report: December 2014

The CFTC releases at the end of each month the futures positions in precious metals of the large banks. A detailed analysis was provided by Ed Steer in his latest newsletter (click here to subscribe), chart courtesy of Goldchartsrus.. The conclusion that stands out is that Scotiabank’s increasing monster short positions in both gold and silver (particularly silver) may put the bank in jeopardy at some point, unless they’ve got themselves covered in other markets like JPMorgan appears to have done in silver.

From Ed Steer’s daily gold and silver newsletter:

The December Bank Participation Report [BPR] also put in an appearance yesterday.  These are the COMEX long and short positions that are all held by the world’s banks.  The report comes out once a month—and the data is extracted directly from the current COT Report discussed above.  For this one day a month we get to see what the banks are up to in all four precious metals and, as I say every month at this time, they’re always up to quite a bit.

In gold, ‘3 or less’ U.S. banks are net short 8,616 COMEX gold contracts, compared to the November BPR, where the net short position in gold for these same U.S. banks was 3,511 contracts.  Since Ted pegs JPMorgan’s net long position at around 13,000 contracts, that means that the ‘2 or less’ remaining U.S. banks must be net short the difference between them.  In this case it’s around the 21,600 contract mark, in order to make the numbers work out.  The two other U.S. banks would be HSBC USA and Citigroup.

Also in gold, ’18 or more’ non U.S. banks are net short 51,991 Comex gold contracts, compared to the 54,811 COMEX gold contracts they were short in the November BPR.

Ever since the CFTC ‘outed’ a ‘non-U.S.’ bank back in October 2012, which I always suspected to be Canada’s Scotiabank—along with it’s 100 percent owned Scotia Mocatta subsidiary—it’s been my opinion that around 40% of the non-U.S. bank short position is held by them.  Based on that, about 21,000 contracts of this non-U.S. bank short position is held by Scotiabank, leaving the other 30,000 contracts to be divided up between the ’17 or more’ non-U.S. banks that remain.  And no matter how you slice or dice that 30,000 contract number, their positions divided up equally between the remaining U.S. banks don’t mean much.

Below is Nick Laird’s BPR chart for gold going back to 2000.  Note the blow-out in the short position in gold in the U.S. banks [red bars on Charts 4 and 5] in August of 2008.  This is when JPMorgan took over the COMEX short positions of Bear Stearns.  Also note the blow-out in gold in the non-U.S. banks [the blue bars on Chart #4] when Scotiabank got ‘outed’ in October of 2012.  The net COMEX short position there blew out by almost double.  The net long position also increased.  The ‘click to enlarge’ feature really helps here.

gold_bank_participation_report_december_2014

In silver, ‘3 or less’ U.S. banks were net short the COMEX silver market to the tune of 10,240 contracts in the December BPR.  The November BPR showed these same ‘3 or less’ U.S. banks net short only 6,159 contracts, so there’s been a pretty chunky increase in the net short position over the reporting month.  Since Ted Butler puts JPMorgan’s short position around the 7,500 contract mark, that means that the remaining ‘2 or less’ U.S. banks have to be short an additional 2,700 contracts to make the numbers work.  These ‘2 or less’ banks would be HSBC USA and/or Citigroup as well.

Also in silver, ’13 or more’ non-U.S. banks are net short 18,046 silver contracts—and since October 2012, I’m of the opinion that at least 90 percent of this short position is held by Canada’s Scotiabank.  This means that their short position in the COMEX silver market is a bit north of 16,000 contracts—and the balance of the contracts, split up between the remaining ’12 or more’ non-U.S. banks, are immaterial.  A quick glance at the chart below will prove that to be the case, as before that date, the foreign banks [blue bars, Chart #4] were basically market neutral in silver.

silver_bank_participation_report_december_2014

In platinum, ‘3 or less’ U.S. banks were net short 4,188 COMEX contracts, which is basically unchanged from the 4,202 COMEX contracts they were net short in the November BPR.  Nothing to see here.

Also in platinum, ’16 or more’ non-U.S. banks were net short 6,260 COMEX contracts, which is a huge deterioration from the November BPR when they were short 3,268 COMEX contracts.  Some of that big difference may come from the fact that there were 12 non-U.S. banks reporting a short position in platinum in the November BPR, vs. ’16 or more’ non-U.S. banks in the latest [December] BPR.

platinum_bank_participation_report_december_2014

In palladium, ‘3 or less’ U.S. banks were net short 8,376 COMEX contracts, which wasn’t much change from the November BPR when these same banks were net short 8,231 COMEX contracts.  Nothing to see here, either.

Also in palladium, ’13 or more’ non-U.S. banks were net short 3,010 COMEX palladium contracts, compared to the 3,856 COMEX contracts that ’12 or more’ non-U.S. banks were short in the November BPR.

palladium_bank_participation_report_december_2014

Although JPMorgan, HSBC USA and Citigroup are the key U.S. bullion banks that are active in the COMEX futures market in the precious metals, it’s becoming more and more obvious that Scotiabank’s monster short positions in both gold and silver—but particularly silver—may put the bank in jeopardy at some point.  That is, of course, unless they’ve got themselves covered in other markets like JPMorgan appears to have done in silver.

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