OK before we all panic and throw in the towel on our gold holdings let’s just slow down and try and figure out who has got the biggest guns at the moment.
In the Red Corner we have the downtrodden savers and investors who are calling it quits on the dying Wall St casino and the policies of central bankers and are investing through the Spyder in physical gold (yeah the good guys)
and
In the Blue Corner (Boo, frown…..the bad guys) we have futures market manipulators who work nefariously to short the gold paper markets at CME for their central banker masters to help try and insure the casino stays open for business and the central bankers can get to keep their jobs which are to keep the US dollar high so they can continue to perpetrate their con job on the world, which is swapping there electronically created US currency for goods and services from the rest of the world. That’s right folks they’ve been swapping printed paper (and now digital money, no more than a few electrons whizzing around computer memories) for “real stuff” for over 60 years and winning and nobody bats an eye lid.
So let’s look at the guns brought out since the beginning of the year and last week by the Red Corner (the good guys)
Total tonnes of gold in the Spyder at the end of last week = 798.77 tonnes
Total value of gold in the Spyder at the end of last week = $US32.47 billion
Total gold added to Spyder since 1 Jan 2016 = 156.4 tonnes
Total value added to Spyder since 1 Jan 2016 = $US10.133 billion
Last week total tonnes of gold added to Spyder 5.65 tonnes (~181,639oz).
Let me breakdown last week’s action on the Spyder for you.
On Mon 7/3, No movements
On Tues 8/3, 2.38 tonnes (~76,481oz) of gold got sold for $US95.87million
On Wed 9/3, 2.08 tonnes (~66,920oz) of gold were bought for $US84.29 million
On Thurs 10/3, 5.95 tonnes (~191,200oz) of gold were bought for $US241.29 million
On Frid 11/3, No movements
So last week the good guys bought 5.65 tonnes of gold and paid net $US229.7 million for it.
But along come the bad guys (Boo) and in their rigged futures market where they get to play on steep margins and they managed to wipe $US12.75/oz off the price of gold between last Friday (11/3, $US1264.75) and the Friday before (4/3, $US1,277.50).
OK so by dropping the price of gold $US12.75 the bad guys reduced the value of the gold in the Spyder by $US95.4 million ($US97.8 million after costs) last week and reduced the value of the 5.65 tonnes of gold the good guys bought last week by $US2.3 million (there good those bad guys, look how easy it is for them to give us good guys a hiding).
Well let’s jump over to the bad guys play ground in futures markets in NY and Chicago and see what size guns they used to drop the price down $US12.75/oz and cost us $US95.4 million in our gold holdings after we actually spent $US229.7 million buying gold last week.
Well first of all a few basics on the CME gold futures market for those that haven’t looked at it.
Each gold futures contract represents 100 troy ounces of gold and involves the physical delivery of that gold before the expiry of the month to which each contract relates.
There is normally one most active contract (month) which trades heavily and it basically sets the price of gold that we see on our screens every day. Currently the active month is April. So let’s see what the bad guys were doing from Tuesday through to Friday last week on the active contract while us good guys were busying buying up 5.65 tonnes of gold.
Mon 7/3 301,376 active contracts remained open.
Tues 8/3 (206,445 Volume) 294,908 active contracts remained open at the end of the day representing 29,490,800oz of gold with a value (based on that day’s closing price of $1,262.00) of $US37.22 billion.
Wed 9/3 (223,483 Volume) 276,650 active contracts remained open at the end of the day representing 27,665,000oz of gold with a value (based on that day’s settlement price of $1,253.90) of $US34.69 billion.
Thur 10/3 (305,558 Volume) 281,676 active contracts remained open at the end of the day representing 28,167,600oz of gold with a value (based on that day’s settlement price of $1,273.10) of $US35.86 billion.
Frid 11/3 (236,137 Volume) 269,016 active contracts remained open at the end of the day representing 26,901,600oz of gold with a value (based on that day’s settlement price of $1,259.40) of $US33.88 billion.
Well that looks like plenty of fire power those bad guys have, $US33.88 billion worth of open contracts on gold at the end of last week. That’s more than the value of gold us good guys had in the Spyder at the end of last week of $US32.47 billion.
Not so fast. Remember the bad guys have got tricks up their sleeves. That’s not anywhere close to the firepower they brought against us last week.
We need to look at the net change in open interest over the week to see what the real picture was. Each open contract in the market is a promise to sell gold at a predetermined price in the future and for each seller there must be a buyer so that each contract can remain open. For any commodities market the matrix below determines whether the market for a commodity is strengthening or weakening.
View attachment 156243
Let’s look at the ledger for the most active contract (April) last week in terms of change in open interest, this gives a better idea of what firepower the bad guys brought.
Mon 7/3 No data (I don't have the data for Monday, the bad guys only give the little guy 5 days worth then it vanishes from the system unless you have expensive market testing software).
Tues 8/3 Change in open interest -646,800 contracts worth $816,261,600 were lost from the market.
Wed 9/3 Change in open interest -1,825,800 contracts worth $2,289,370,620 were lost from the market.
Thur 10/3 Change in open interest 502,600 contracts worth $639,860,060 were added to the market.
Frid 11/3 Change in open interest -1,266,000 contracts worth $1,594,400,400 were lost from the market.
So over the course of last week 32,360 open contracts were lost to the market worth $US 4,060,172,560 (approximately $US4.1 billion).
I don’t have volume or price data for Monday (7/3) but the market last week can be represented in the three charts below.
View attachment 156249
View attachment 156250
View attachment 156251
Price and volume were relatively flat from Tuesday through to Friday and Open Interest was falling. Based on the matrix presented above it remains ambiguous as to whether the market for gold was strengthening or weakening, either interpretation would have been equally valid on Friday (based on the open interest, volume and price data from Tues through Friday IMO).
But that’s not even the point of this post. That's just what the bad guys use to front run and beat the speculators on the other side of their trades wicked trades. Great if you can get the sheep to be guided by simple rules.
This post is about figuring out what firepower the bad guys brought to the battle last week so let’s get on with it.
Well we know there was a net downward change in open contracts in the market of 32,360 (worth $US4.1billion but I don’t know how the removal of these contracts from the market changed the balance between people who held short positions (bad guys) and those who held long positions (good guys). If we assume the worst case and every one of the contracts taken out of the market last week was a long (good guys) then how much money did the bad guys actually need to remove the longs and bring the price of gold down by $US12.75/oz. Well I don’t have the data for Monday (7/3) but based on the value of the contracts removed between Tuesday and Friday and their value of US$4.1 billion and the margin that must be maintained of $US4,500 per contract
http://www.cmegroup.com/trading/met...ue&clearingCode=GC§or=METALS&exchange=CMX
the bad guys only needed to spend $US145,620,000.
The real figure depending on the balance between longs and shorts in this market will be somewhere between $US0 and ~$US145.6 million (remember I haven’t included the data for Monday so the upper bound might be larger).
So us good guys bought 5.65 tonnes of gold and paid net $US229.7 million for it.
But along come the bad guys (Boo) and in their rigged futures market (where they get to play on steep margins) and with probably less than $145.6 million they managed to wipe $US12.75/oz off the price of gold thereby reducing the value of the gold in the Spyder by $US95.4 million ($US97.8 million after costs) and the value of the 5.65 tonnes of gold us good guys paid $US229.7 million for last week by $US2.3 million.
Us good guys need to stop getting spooked by the bad guys because we are bringing plenty of fire power to the battle at the moment and the bad guys leverage is not working to dent our gold holdings very much as this example from last week tries to prove.
The bad guys must have brought some new ammo to the party yesterday but it’s going to cost them plenty to bring that pile of gold we accumulated in the Spyder since Jan 1 down again. Remember we’ve paid $US10.133 billion accumulating it since 1 Jan 2016.
The bull-run on gold is still in its infancy and ain't going stop IMHO.
By the way I’m not going through this exercise every week on the Spyder Watch thread.
Eshmun
