Gold on the sales slip: The banks trading on the COMEX futures exchange held short positions in the record amount of 321,885 contracts in early January. That corresponds to 1,000 tons of gold.
Once at the beginning of the month, the US stock exchange regulator CFTC publishes the “Bank Participation Report”. This includes the current positions of the banks trading futures on the US futures market. We have been monitoring the activities of these institutions (broken down into US banks and non-US banks) on the gold market for years. And with the increased gold price, gold futures positions in banks have increased sharply. There is a new record high.
US banks and gold
As of January 7, 2020, the net short position of US banks rose 9 percent compared to the previous month to 109,567 contracts. This corresponds to forward sales of 340 tons of gold. It is the highest value since February 2018 (at that time 114.08 contracts). Five (unnamed) US banks were responsible for this position.
All banks – 1,000 t gold “short”
All banks together (US banks and non-US banks; a total of 40 institutions) have a net short position of 225,111 contracts. That is a new record. The pure short positions have a record volume of 321,885 contracts. Converted, the banks recently had sales coupons over 1,001 tons. The net figure is 700 tons.
Open interest – also a record
Open interest also rose to a high of 785,857 contracts as part of the Bank Participation Reports. This corresponds to an increase of 12 percent compared to the previous month. The share of short positions in the hands of banks in open interest was 41 percent recently. In the previous month it was 45 percent. That means that absolute gold sales have increased, but the concentration of banks on the short side has decreased somewhat.
In their function as “market makers”, the banks take the opposite position to other commercial and, above all, speculative traders in a large number of futures contracts on the futures market. But you also act on your own cash. As a rule, however, nothing of the gold offered for sale in the form of futures is physically delivered. The contracts are largely settled in cash on the due date. So it is traded with so-called paper gold.