What's The Deal?

Jerry Seinfeld once asked: "And what's with Grape Nuts? You open a box...no grapes, no nuts. What's the deal?". Similarly, JPMorgan claims to run a gold vault. But if that vault contains no gold, is it still a gold vault? What's the deal?!?

But this deal is serious business. Serious, indeed. Much has been made of the tremendous drawdown of the Comex gold vaults. From a high of nearly 12MM ounces in early 2012, total (registered and eligible) gold in the vaults has plunged to just 7MM ounces tonight. And registered gold (that which is in good delivery form) has dropped from 3MM ounces earlier this year to just 950,000 ounces Friday. 

Some Bullion Banks have seen their vaults nearly emptied, as we saw last week with Brinks. http://jessescrossroadscafe.blogspot.ie/2013/07/brinks-is-being-drained-of-gold-with.html

And now we have the curious case of JPMorgan. Harvey Organ (http://harveyorgan.blogspot.com/) has been diligently monitoring delivery notices for years and the situation with JPMorgan caught his eye about two months ago. I've followed along with interest but it wasn't until the huge withdrawal from JPM's eligible (customer) account on Thursday that I really began to get interested. http://www.zerohedge.com/news/2013-07-19/jpm-eligible-gold-plummets-66-one-day-total-gold-fresh-all-time-low

According to Harvey, the situation is this:

  • The drawdown of JPM's eligible account reflects the final settlement of some outstanding delivery notices from May and June. The 90,000 ounce withdrawal on Thursday finally "squared the books" on the customer side.
  • However, during the Comex delivery month of June, 5,024 delivery notices were issued by the JPM dealer side (registered) and this gold has yet to be delivered. Important math: 5,024 dealer delivery notices is 502,400 troy ounces of real, actual, good delivery gold. Important calendar information: The notices were for the June13 contract. Monday is July 22.
  • As of Friday, the JPM dealer (registered) account only held 390,000 ounces.
  • Uh-oh.

Below is the full delivery report from last Thursday:

GOLD           Report Date: 7/19/2013
Troy Ounce           Activity Date: 7/18/2013
                 
DEPOSITORY   PREV TOTAL RECEIVED WITHDRAWN NET CHANGE ADJUSTMENT TOTAL TODAY  
                 
BRINK'S, INC.                
  Registered   134,524.790 0.000 0.000 0.000 0.000 134,524.790  
  Eligible   122,801.595 0.000 0.000 0.000 0.000 122,801.595  
  Total   257,326.385 0.000 0.000 0.000 0.000 257,326.385  
                 
HSBC BANK, USA                
  Registered   221,093.814 0.000 0.000 0.000 0.000 221,093.814  
  Eligible   3,116,776.173 0.000 0.000 0.000 0.000 3,116,776.173  
  Total   3,337,869.987 0.000 0.000 0.000 0.000 3,337,869.987  
                 
JP MORGAN CHASE BANK NA                
  Registered   390,092.326 0.000 0.000 0.000 0.000 390,092.326  
  Eligible   136,380.609 0.000 90,311.162 -90,311.162 0.000 46,069.447  
  Total   526,472.935 0.000 90,311.162 -90,311.162 0.000 436,161.773  
                 
MANFRA, TORDELLA & BROOKES, INC.              
  Registered   14,355.086 0.000 0.000 0.000 0.000 14,355.086  
  Eligible   6,717.670 0.000 0.000 0.000 0.000 6,717.670  
  Total   21,072.756 0.000 0.000 0.000 0.000 21,072.756  
                 
SCOTIA MOCATTA                
  Registered   190,375.136 0.000 0.000 0.000 0.000 190,375.136  
  Eligible   2,746,359.412 0.000 0.000 0.000 0.000 2,746,359.412  
  Total   2,936,734.548 0.000 0.000 0.000 0.000 2,936,734.548  
                 
TOTAL REGISTERED   950,441.152 0.000 0.000 0.000 0.000 950,441.152  
TOTAL ELIGIBLE   6,129,035.459 0.000 90,311.162 -90,311.162 0.000 6,038,724.297  
COMBINED TOTAL   7,079,476.611 0.000 90,311.162 -90,311.162 0.000 6,989,165.449  

OK, so what does all this mean?

Simply put, JPM's gold vaults only contain 46,000 ounces of eligible gold. Remember this is unallocated, stored, likely-just-paper certificate gold. In the real deal, registered category, JPM shows 390,000 ounces BUT the are "past due" in delivering 502,000 ounces from June. This leaves them with a real deal deficit of 112,000 ounces. Even if you consider eligible to be actual, free and clear gold, 46,000 minus 112,000 leaves JPM at a current deficit of 66,000 ounces. Oh and did I mention that First Notice Day for the delivery month of August is next Wednesday, the 31st? How many delivery notices and additional ounces will JPM be on the hook for next month? Another 500,000? Probably at least that many.

So, what's a girl to do? It would appear that JPM has two choices:

  1. Get their hands on some gold. FAST! They need to deliver not only the June notices but those that will be coming for August. Is this why JPM has flipped from a net short Comex gold position of 50,000 contracts to a current net long position that Ted Butler estimates at 75,000 contracts?
  2. Blow up their custodial arrangement. Basically pull an ABM AMRO. Cash settle at the current bid everyone with gold certificates held at the bank. http://www.silverdoctors.com/dutch-bank-abn-amro-halts-physical-gold-delivery/ & http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/22_Maguire_-_Elaborates_On_The_LBMA_Default_%26_Ensuing_Panic.html

Neither option is particularly good for JPM but both options are extremely good for those hoping and planning for the end of the decades-long fractional reserve bullion banking scheme.

Of course, there is another route that we need to be aware of: The Classic Gold Cartel Beatdown. The Monkey kneejerk reaction may simply be to raid price in order to keep the current game going a bit longer. The Cartel has long employed a price smash right before First Notice Day with the intent of "dissuading" as many as possible from taking delivery. ("Why stand this month? If prices are falling, maybe I can buy cheaper two months from now!")

Additionally, as I pointed out two weeks ago, a new pattern has emerged where prices are smashed like clockwork, right in the middle of delivery months, often right around the 12th of the month. (http://www.tfmetalsreport.com/blog/4827/pattern-emerges) Maybe The Cartel holds off on another manufactured decline until they see how many stand for August and then put the hammer down three weeks from today?

Either way, the alternative for JPM is to raid price and hopefully inspire enough panic capitulation that the GLD sheds another 100 metric tonnes or so. JPM, as an Authorized Participant, could then lay claim to a large chunk of this metal and deal it out to those standing in August and those leftover from June.

Now if that frightens you, it shouldn't. Each successive raid only leads to greater and greater physical demand, particularly from Eastern central banks. By raiding price in order to plunder the GLD, JPM would simply be digging their hole even deeper. Sure, they may put off their Day of Reckoning for a few weeks but they won't have fixed their main problem, which is:

JPMORGAN IS A BULLION BANK WHICH HAS NO ACTUAL BULLION.

And so we've come full circle and arrived back at the original question: If a gold vault contains no gold, is it still a gold vault? And if JPM, and by extension The Comex, has no gold, how much longer can the current fractional reserve, leveraged and rehypothecated system of gold price suppression continue?

Chew on that and get ready for a very interesting week.

TF

p.s. And what's the deal with The Professor? He can make a radio out of a coconut but he can't fix a hole in the boat? What's the deal?!?

152 Comments

Icarus's picture

Is this first?

Man I've got to get a life.  First on a Sunday night.

Icarus

Metals looking good for now.  Let's wait and see what the London open has in store.  Congrats to Phil for winning the other London open..........

Turd Ferguson's picture

And you should watch this

MODERATOR
Marblesonac's picture

Second amendment

Second amendment protects all other amendments!

08Gold-Wing's picture

just checking in.,.,.,

thrud.., or 4th !!

Burt Reynolds's picture

I plead the fifth

Hopefully.

Really though.  Who is going to enforce anything if the big fraud gets exposed?

foggyroad's picture

Wow Jamie

Golds on Fire!

cough...

cough...

couldn't resist.

...can't wait for the official story from the lying sacks of sh$t.

Ps. a bank vault is burning 25 fire trucks, not a cop in sight... it not like it's a vault or anything...

pps. well there you have it thanks TF.

TF. wrote..

"Reckoning for a few weeks but they won't have fixed their main problem, which is:

JPMORGAN IS A BULLION BANK WHICH HAS NO ACTUAL BULLION.

And so we've come full circle and arrived back at the original question: If a gold vault contains no gold, is it still a gold vault? "

The cops must be aware the vault is empty, so no need to stop on by, nothing but an empty warehouse, nothing to steal, nothing to guard.... pass me the one with sprinkles on top.

OC15's picture

Here's how you solve your delivery problem

Adolf_Hitler's picture

Harvey Organ is Wrong!

I don't know where Harvey got the 5024 number. According to Comex, in the delivery month of June. 

For Customers, 

JP Morgan issued 7219 and stopped 97

For House(JPM itself)

JP Morgan issued 206 and stopped 547. 

http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsYTDReport.pdf

Besides, JP Morgan doesn't have to issue delivery notices ONLY against gold in its vault. It can issue delivery notices against gold in other vaults. Up till now, I haven't seen any rules in the Comex Rulebook forbids JPM to do this.

Goldman Sachs issued 269 delivery notices in June and stopped 171. BUT Goldman Sachs is NOT a COMEX Depository. The only way GS can issue delivery notices is to issue notices against gold in other institutions's vaults. JPM can issue delivery notices against, say, gold in Brinks's vault too! Therefore, it doesn't matter if JPM issues more delivery notices than gold in its own vault. Harvey's calculation makes NO sense.

Igiveup2's picture

8th on a slow night

Read first

Urban Roman's picture

Or, a third option

3. Declare a force manure because of a reported (no smoke) fire in the basement of a building 2 blocks away from the vault. Hope nobody notices that it was 2 blocks away, and that they do not actually have offices in that building any more.

luv2stak's picture

yay! 10!

gold going STRAIGHT up! over $20 thru 1316.

silver shrugs, up 41 cents, hasn't broken $20

newest golden jackass just out - Jim sounds on the verge of hysteria... 

deutsche bank is a 'dead man walking' according to his several sources, and the System is starting to spin apart... the center cannot hold much longer...

                                                but he's been saying that for years

If I was a gambler,  I'd put $ on JPM declaring 'force manure' for a vault fire that 'melted all the gold'...  

SRSrocco's picture

TURD GREAT POST

Things seem to be getting more strange every day in the gold market. Furthermore, the FEDS policies of pushing the price of silver so low we are now seeing big cuts and mine closures by silver mining companies. 

http://srsroccoreport.com/fed-policies-on-silver-producers-mine-closures-big-cuts/fed-policies-on-silver-producers-mine-closures-big-cuts/

Salisbury House's picture

This one hits the spot!

This one hits the spot!

Dagney Taggart's picture

The Deal Is...

the second to last act of a bankrupt corporation is to loot itself.

The last act is to blow itself up.

I pray that one day, for your children's sake, you'll see 911 for what it really was, Turd.

PS. JPM will annex Barclays. Watch.

Mudsharkbytes's picture

Dagney…

…earns a hat tip for the 9/11 comment if for no other reason.

Fred Hayek's picture

A little bit off topic, but in light of Detroit's bankruptcy . .

Are muni bond buyers the type of folks who might find interest in precious metals? 

I have no idea what's the demographic and ideological profile of a municipal bond buyer.  Can anyone help? 

These are people who didn't play in the stock market and who presumably bought muni bonds in part for the preferable tax treatment.  But, okay, you're one of these people.  You see Detroit declare bankruptcy.  You read that bond holders are going to get something like 10 cents on the dollar.  Yikes!  You try to remember exactly what bonds you have in your accounts.  That young man from the brokerage said they were all very safe.  But you never quite trusted him.  He's a little too slick.

So, what do these people do?  Are these the kind of people who want to get to that first life boat?  I mean, Philly and Chicago are already bankrupt; it's just not official.  The same is true of scores of other cities and most of the (nod to Barack Milhous Obama) 57 states. 

Do some of these people look around and question the values of an already all time high stock market and the rest of the bond world as interest rates seem to be changing direction?  Do some of these people seriously look into gold and silver?

judejin's picture

chinese aunties sitting on the sidelines start to chase uptick

chinese aunties sitting on the sidelines started to chase the uptick.  after the april 1320 was taken out in june, chinese aunties became cautious. but when it rebounded, they tiptoed back.

small-sized gold bars are back-logged, delivery is delayed by up to 20 days or who know.

physical delivery at shanghai gold exchange slowed to a trickle again in july.

even physical silver delivery is scanty. on the shanghai gold exchange, when longs demanding delivery overwhelms shorts ready to delivery, shorts pay 0.02% penalty to the longs. shorts have been paying 0.02% penalty to the longs almost everyday so far in july in both gold and silver. this is especially rare for silver because usually silver longs pay penalty to the shorts.

18.18 is a very lucky number for silver to mark a historical bottom on june 28.

"18.18" means "soon to be rich, soon to be rich" in chinese.

El Gordo's picture

Munis - no fear

No reason to fear the munis - they're insured.

(Trying to control my laughter)

Let's face it, if you can't rely on the full faith and credit of the people living in a municipality, there's always AIG to fall back on.

Frankenstein Government's picture

The Silent War

I have been following the vault amounts at Harvey's joint too.

I think the SHTF as early as this week. The bullion bankers are out of gold. I talked about this here...http://thecivillibertarian.blogspot.com/2013/07/the-gold-war-has-begun-in-earnest.html

I put my money where my mouth is last Tuesday. I took my entire account, no margin, and went all in. I still have my physical but I am going to use miners because of the potential astronomical returns in a sector that has been all but destroyed.

I think the time is finally here. God bless all of you.  

TheGoodDoctor's picture

Turd, the Professor is the

Turd, the Professor is the smart one! I too wouldn't want to leave the island when I know that Ginger and Mary Ann are there! Thurston has Lovey. The Skipper has his "Little Buddy". I'm telling you the Professor is the smart one! :)

PS Full moon tomorrow night. 

AlienEyes's picture

LOL

It looks like the morgue has painted itself into a corner and then set their house on fire. ROF-LMAO!!!

Now we'll see if any gold is left in Fort Knox. If so the treasury dept. will be slipping it to JPM mucho pronto.

If they can't control the price of gold, the dollar just screwed the pooch.

tread_w_care's picture

My cousin asks me over dinner on Friday night . . .

If I still am collecting silver and guns.  You damned right I am, son.

Most recent addition is November 1943 manufacture M1 Garand (.30-06) with about 3,000 rounds down the pipe from our dear Federal (yes! Federal) Civilian Marksmanship Program.  I highly recommend.  You'll have a bit of a wait but it is very worth it.  Beautiful machine, the finest battle implement ever, per Patton.  Accurate to 1,000 yards. 

Silver I haven't bought heavy in phys since a small buy around $35.  Most is in the $17 range.  Remember shopping  in the $12 range but didnt' have the gumption to pull the trigger then.  Live and learn right?

Point is people continue to prepare.  Get right with your God and your neighbor.  Make a plan.  Build your skillset, be ready to share it and lead when appropriate.  We will need it when it comes time . . .

judejin's picture

some southern provinces of china

have wedding traditions similar to india's.  in the wedding ceremony, all relatives will decorate the bride with gold jewelry.

so this year, smack downs in gold prices are gifts for ppl in these provinces. in tv interviews, chinese aunties all said they saved thousands of RMB by buying the dip.

in china, ppl lack good investment vehicles. stocks are no good. cash is no good. real estate is restricted and taxed.  so when gold rebounds above 1500 and makes new highs, more and more chinese auties and household will stick to the indian way of saving in gold bars.

most empires fell because of enemies from inside. USA is no exception.

Missiondweller's picture

@Hayek

When I used to sell Munis and clients bought it was always for one of two reason, 1) Safety 2) avoiding taxes.

Some people really, really, really hate to pay taxes, especially people who created their own wealth. The volatility in gold may have scared some out of gold (definitely GLD) but they may very well see gold as an important "estate planning tool" in hope of voiding taxes.

Missiondweller's picture

@ El Gordo

For a brief moment I thought you were serious.

Back in the late 90's when I sold them they were considered pretty much as safe as treasuries with a tax equivelent yield that was higher. Those days are long one.

I think Meredith Whitney was right but way too early on her call because she didn't realize the crazy things cities and states would do to keep the Ponzi going and try to look solvent. Same as Ben trying to keep the party going I guess.

Sad-descent's picture

@Fred

Most of the people I know involved in munis tend to be high income professionals with advisors that handle their investments.  We probably don't see a lot  of involvement from them until the mindset of advisors change.

Sad-descent's picture

Gains holding

London trading is opening up and so far we are holding the gains.  So, I guess the question is do the shorts do some covering here? or doe Dimon take out a stick and beat the tar out of us.

Hammer's picture

I am on vacation for a couple

I am on vacation for a couple of months and having a great time back in my home country.

I recently checked in with a couple of LMBA registered refineries/dealers in Tokyo last week to see that both had halted retail sales of one ounce Canadian Maples. Fractional coins were available by inference as they only referred to the once ounce version specifically. Viennas, the other main staple in Japan due to its high purity, were still available to retail punters however.

Byzantium's picture

Inflection point!

If the cartel can't give these prices a good whack downwards, then they risk spiraling upwards with increasing momentum.

Past form suggests a cap at around 1320 with silver kept below $20, or a good smackdown to perpetuate the increasingly brittle myth of their invincibility.

The beauty of it is, they will have to orchestrate a similar smack-down every other day; they are now trying to hold back the tide! Goodbye long fought for Cartel long position, back to a mega short position they will have to go, and for what, just to postpone the long anticipated default.

Popcorn at the ready..... 

Byzantium's picture

The grand plan...

to kill demand for gold by destroying the price.....

It went wrong; the paper crowd sold, but they don't matter.

The phys crowd really matter, and they backed up the truck.

I wonder whose head will roll for this?

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