The most recent Commitments of Traders (COT) report, for positions held as of Tuesday Feb 1, indicated, even more than expected, massive managed money selling and commercial (bank) buying in COMEX gold and silver futures. So, once again, as on every big price decline for decades, the banks were big buyers, while the managed money traders were big sellers. In the near 40 years I have followed these markets closely, there has never been an exception to this pattern – on big price downdrafts, the banks on the COMEX are always big buyers.
No doubt, the level of commercial buying on the recent plunge in gold and silver prices should provide the basis for a significant rally, also as usual, but I’d like to stop and have you reflect on this in a different manner. There is a reason why the banks always end up as big buyers on every gold and silver price smash and that reason is that they collude with each other. In fact, there is no possible alternative explanation.
Take this most recent COT report for example. Within the course of 5 trading days and in which gold prices plunged more than $70 and silver plunged more than $1.70, the roughly 70 reporting commercial traders in each market (largely the same banks) bought close to 50,000 net contracts of gold (5 million oz) and more than 12,000 net silver contracts (62 million oz).
The first thing that you should be asking yourself is how the heck could 70 different commercial traders managed to buy (covering shorts and adding longs) on such an extreme selloff – such as, are they just lucky or is God on their side? No, God is not on the banks’ side, nor are they simply lucky – it’s something else entirely. The 70-odd gold and silver commercial traders on the COMEX colluded among themselves to make sure they stuck together and refused to pay up to buy the 50,000 gold and more than 12,000 silver contracts and let the sellers come to them. Try coming up with another explanation.
Wait a minute- - I can hear some asking, what about the sellers and what was their motivation? The same COT report shows that traders called managed money traders sold even more contracts than the commercials bought – more than 51,000 gold contracts and an astounding 15,400 silver contracts (77 million oz). Why did these managed money traders sell so many gold and silver contracts? Because they are rigid technical-type traders that continually fall prey to the phony price rigging signals set by the collusive commercials.
Does that mean the managed money traders are also colluding among themselves to all sell at the same time – just like the commercials all buy at the same time? The answer is simple – no one colludes to lose money, only to make money – and the manged money traders always end up losing whenever they sell in unison, like last week. Since the commercials always end up as big winners whenever they buy in unison – only the commercials can be accused of collusion.
It goes without saying that traders banding together to collude in the buying or selling of commodities at artificially derived prices is strictly against US commodity law – so how can the activity I just described possibly be considered legal? The answer is that the activity is clearly illegal, but the regulators responsible for enforcing the law continue to look the other way. These regulators include the federal commodity regulator, the CFTC (which publishes the COT reports), as well as the designated industry self-regulator, the CME Group, Inc. (owner of the COMEX) and finally, the US Justice Department.
A key problem with ending the gold and silver manipulation is that it is not well-defined. But the obvious collusion on the part of the COMEX commercials (mostly banks) in the COT report this latest reporting week provides an opportunity to do something constructive about the manipulation. So clear was the illegal activity and collusion of the COMEX commercials this COT reporting week, that if you can’t come up with a legitimate explanation for how virtually everyone of the 70 commercial traders in COMEX gold and silver futures all ended up as buyers on the big selloff – then ask the regulators yourself.
Send them this article and ask them to explain how it could be legal for virtually every commercial trader on the COMEX to be a buyer on sharply lower prices without colluding among themselves? And if you feel like you’d like to do more, ask your elected representatives as well. I’d use these email addresses for the CFTC –
rbehnam@cftc.gov – chairman
dstump@cftc.gov – commissioner
vmcgonagle@cftc.gov – enforcement
glowe@cftc.gov – enforcement
mtente@cftc.gov – market oversight
Ted Butler
February 7, 2022
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