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By Sprott Money

Assessing The Latest Bank Participation Report

Posted with permission and written by Craig Hemke, TF Metals Report (CLICK HERE FOR ORIGINAL)

We monitor the daily open interest changes in Comex gold and silver. We also wait each Friday for the latest Commitment of Traders report. Once a month, however, we also get the Bank Participation Report and, though it might be complete garbage and full of lies, we also need to consider this report for some historical perspective.

We’ve written about these CFTC-generated reports so many times, it would be impossible to link every post. However, nearly every post began with these bullet points. Here they are again, just so that we’re on the same page:

• The CFTC’s Bank Participation Report is issued monthly from a survey taken at the Comex close on the first Tuesday of every month. The report summarizes the combined positions of the four largest U.S. banks (primarily JPM, MorganStanley, Citi, Goldman but occasionally others) and the twenty largest non-U.S. banks (Scotia, HSBC, DeutscheBank, UBS, Barclays and others).
• These reports might be utter nonsense and complete falsifications, designed to mislead you and get you leaning the wrong way. In 2014, JPMorgan was fined by the CFTC for “repeatedly submitting inaccurate reports relating to the required reporting of positions”. See here: http://www.cftc.gov/PressRoom/PressReleases/pr6968-14

Again, we know that what The Banks report as their “positions” provides an incomplete picture at best. Not only do The Banks maintain considerable long and short bets in the OTC market, they also operate numerous, offshore hedge funds and utilize these funds to take positions not included in the CFTC data as “commercial”. So, what good are these reports? Similar to the weekly Commitment of Traders reports, the Bank Participation Report is only useful/interesting when considered historically. Here’s an example. Note how the positioning of the 24 Banks changed through 2015:

Price rallied in early 2015, reaching the 2015 high of $1308 in late January and, by the first Tuesday of February 2015, the report looked like this:

As you no doubt recall, price then declined through the balance of 2015 as the bear trend continued. The 24 Banks used this price weakness to add a few longs and cover a bunch of shorts. By the December BPR, the data looked like this:

Yes, you are reading that correctly…The 20 Non-US Banks actually had a cumulative NET LONG position in Comex gold futures as of 12/1/15. And even as price began to rally in late December and early January, the report …read more

Source: Assessing The Latest Bank Participation Report

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