CitiBank draws the short straw and covers the 2-1/2 tonne naked short gold position. Plus an analysis of all naked short rescues since 2022.
Some have suggested that I post to substack my analysis that is more comprehensive … so here it goes:
On Friday I posted about a 80,000 oz naked short position that had remained open with only 3 days to contract expiry, and I speculated on how those contracts would settle. That worked out essentially as I predicted. It appears that the position was transferred to CitiBank as it was Citi who issued the delivery notices.
I was more thorough than usual on Friday's post about this subject and wish to keep the reiteration to a minimum. You could catch up here:
Since I nailed this one pretty good, some folks will assign themselves as the adults in the room and inform me of the uncertainties. For those folks ... I don't KNOW with certainty what positions if any were transferred. I'm working off patterns. Generally bullion banks have plenty of metal available to cover short positions and generally they issue delivery notices within the first few days during the delivery period. My assessment of the behind the scenes dealing is an interpretation. Back to the program ...
It appears that an unknown naked short had 782 September gold contracts and did not have the 78,200 oz of gold to settle. They likely transferred the position to CitiBank along with some extra fiat to account for Citi's troubles. Citi then issued delivery notices on the entire lot. See anything odd about Citi entering late in the game:
This happened Friday night, so my Monday morning meeting idea wasn't exact ... although that is a metaphor.
There was little doubt that Citi had gold available since first notice day as they stopped 3,724 gold contracts in June. Millennials would call that a shit-tonne of gold. These 782 delivery notices would be a small fraction of that. The alternative explanation is that Citi had a 782 contract short position open until Friday, woke up and then issued delivery notices near contract expiry. Not likely.
If you're following my thread you know that I recently "caught" BofA doing a naked short bailout on both the June gold and silver contracts plus some earlier situations.
To be thorough, I reviewed all gold and silver activity from January 22 through these September 23 contracts to look for the same pattern of a naked short rescue. All of the ones I identified were bullion banks issuing a large tranche in the last week of the contract. Those are plotted below.
The greyed area is the 11 month period where JP Morgan didn't issue or stop physical gold or silver. I have speculated that they subcontracted that out to others during that period.
Comments:
On the gold October and November contracts, I suspect that JP Morgan's house account was on the other side of those bail outs because of 1) the size of the position and 2) because this was during the 11 month period where JP Morgan had withdrawn from physically settling contracts. I believe they had others bullion banks settle contracts for them.
I've shown on the silver plot the 1,063 contracts by BMO (Bank of Montreal) in December 2022, however this is the only one that deviates from the pattern. First, it is BMO whereas all the others are Citi and BofA. Second, BMO had issued delivery notices earlier in the delivery period ... in other words (it was likely) they initially had short positions of their own. Third, in the waning days of the contract they issued delivery notices over a 4 day period which isn't a pattern for a bank who did a naked short rescue. It's like they were rummaging around for silver to deliver. I pasted it on the plot because it IS a bank delivering metal late in the contract but it is not likely a short rescue.
With that in mind, some observations:
Over the last 21 months there have been 3 silver short rescues for a total of 713 contracts or 3.57 million oz of silver.
Over the last 21 months there have been 4 gold short rescues for a total of 4,445 contracts or 444,500 oz or 13.8 tonne.
It has always been either BofA (4 times) or Citi (3 times) who have been involved in the naked short rescues. Perhaps the Monday morning meeting is just a trio?
During the 5 month period of August 22 through December 22, there were 5 naked short rescues. These occurred during the 11 month period after JP Morgan had been gelded and was not delivering physical metal.
There have been 3 in the most recent 4 months, June 23 through Sept 23. Being that JP Morgan has returned to the physical market and short sale rescues continue is an indicator of stress.
What do I get out of this? The naked short sale rescues are another indicator of comex stress and I'll carefully follow going ahead. The June silver contract was a fine example of a dearth of metal available for delivery and that was soon further exposed when nearly all of registered silver was required to turn ownership to settle longs on the July contract. How much of that metal had changed ownership off exchange just so shorts could be covered? Last minute metal juggling is a signature of market stress.
And most important, it demonstrates the fraud of comex pricing. Off exchange deals move the price discovery mechanism to behind the scenes deals. That is a price concealing market ... not price discovery.
++++++++++++++++++++++++++++++++++++++++++++++++++ Silver Vaults
It was like a jail break at comex vaults ... 2.4 million oz is gone. One Truckload at Brinks, one at CNT, one at Delaware, 200 koz at Loomis and 450 koz at MTB. Gone!
++++++++++++++++++++++++++++++++++++++++++++++++++ Gold Vaults
38 koz departed MTB's vault:
Thank you Ditch! What a saga. They won’t be able to rewrite or conceal this history when this is over.