More Deception at The Comex

This latest move is so brazen in its audacity, even I am stunned. But, since no one else is talking about it, maybe I'm just crazy. Let me lay it out for you and you can decide for yourself.

OK, before we get started, we'd better go back and cover the basics.

The Comex is a futures exchange that does, occasionally, make physical deliveries. To provide for these deliveries, five banks maintain depository vaults in New York. Updates on the daily changes to the amount of metal in these vaults is provided by The CME Group, which owns The Comex, and can be found here: http://www.cmegroup.com/trading/energy/nymex-delivery-notices.html

Within these vaults, metal is delegated to two categories, eligible and registered.

  • Eligible metal is metal being vaulted at the bank warehouse but NOT eligible to be used in the delivery process.
  • Registered metal is metal that is recognized by the CME as available for good delivery against futures contracts.

I went searching for a concise explanation of the eligible/registered process and, in the short time I had this morning, the best article I found comes from BullionVault. The article was meant to downplay the significance of declining Comex stocks. Many folks, myself included, would disagree with the author's conclusion. Regardless, that's a topic for another day. In this instance, what's helpful is the background info the author provides. The full link is here but please read through the C&P below: http://goldnews.bullionvault.com/comex-gold-stocks-072420136

First question: How does gold get into warehouse stocks of the futures exchange? Although it's a lengthy process, the answer is actually quite simple. Gold is recovered either from mine output or scrap jewelry and other products, such as bars and coins, at a refinery. The refiner then produces gold bars to the standard and specification of the exchange, in this case the CME Group.
These gold bars belong either to the refiners themselves, meaning they have bought and own the gold. Or they belong to the refiner's customers, who bought and owned the gold at the refinery, hiring it to make that metal into saleable bars.
Now, for this particular refinery to deliver metal onto the commodities exchange, it must be a registered acceptable brand, such as Heraeus, Johnson Matthey or Metalor Technologies to name a few.
Once these gold bars are produced, the metal must then be transported to the warehouse by exchange-approved carriers such as Brinks Inc., Via Mat International or IBI Armored Inc. There is no other way for the gold to get onto the exchange. Gold may move between Comex-approved warehouses, such as those operated by HSBC Bank, Brinks Inc., and Scotia Mocatta Depository. But any moves made between these warehouses must be made using the same approved carriers. No gold can enter the marketplace from outside of this refining loop.

Once gold is removed from an exchange-approved warehouse and held somewhere outside of this circle of integrity, there is no way for the CME exchange to guarantee the bar's quality. This means that once a person or investor removes bars from the warehouse, then to return them to the exchange they would need to start at the beginning again. By going through the hands of the gold processor and refiners, this provides guarantee of the standard and quality of the material being delivered on the exchange.

So with the gold inside the warehouse, second question: When is the gold considered eligible or registered on the commodities exchange?
Answer: When acceptable bars are brought into an exchange-approved warehouse they become "eligible" for settlement of gold futures contracts traded on the exchange. So at this point, the owner of the bars may deliver them onto the exchange, and warehouse receipts are created. That is when the gold bars become "registered" stocks.
 
Eligible gold stocks may or may not ever become registered stocks. Why? Because the warehouse is still a warehouse and the owner may simply want to vault their metal securely, before using it to meet demand elsewhere – for manufacturing, or from investors in another marketplace, such as Asia. This eligible gold may belong to an investor, a refiner, a hedge fund, a bank or producer. Many times these people are holding the metal for their end customers. And it may move at any time, and is much more flexible than the warehouse receipts that are registered stocks.
The CME, the exchange, does not have any direct control over nor interest in the size of eligible stocks. Registered stocks however are officially recognized by the CME for good delivery on the exchange. That means that this inventory exists and is set aside to make delivery against gold futures contracts. Traders who stand for delivery, rather than cash payment, when their contract settles take delivery of the warehouse receipt. This does not change the quantity of registered stocks inside the warehouse. It remains registered, but the receipt changes ownership.
If a gold futures buyer wants to take physical delivery of the gold and "break" the receipt then this is possible. But it is a process and takes time. Once broken, if the gold remains in the exchange circle of integrity – meaning the exchange-approved warehouse – then those bars become eligible stocks. But if the gold bars are removed from the exchange-approved warehouse then they no longer are eligible and are no longer tracked in any way.
 

Third question then: How do the warehouse receipts work?
A warehouse receipt is a bearer instrument much like a check. It can be endorsed from one party to another. The holder of the receipt pays the storage costs. Most times when people take delivery of a warehouse receipt they leave it with their brokers. In some cases people may want to take possession of the warehouse receipt themselves. This is rare, just like with equity or bond certificates; no one actually takes delivery of the documents any longer. But it is still possible for a fee.
If a person owns a warehouse receipt, the gold that it represents is still in the registered stocks, even if they have taken physical delivery of the document. They can always redeliver these receipts onto the exchange by selling contracts.
 

OK, hopefully this all makes sense because now I'm going to present to you the problem. In the article and on the CME website, the notion of paper gold is never addressed. Yes, there are warehouse receipts that some fools willingly accept at delivery, thinking they have a claim to actual gold. BUT...the metal that is "held for storage" in the depositories is assumed to be REAL METAL, held there on behalf of REAL CLIENTS. Registered gold backstops the delivery process of the exchange. Eligible gold may, one day, become registered and ready for delivery. More likely, it is simply being vaulted at the depository for safekeeping. Please take a moment to go back up and re-read the BullionVault piece, paying particular attention to the sentences I've underlined.

As mentioned above, each afternoon the CME Group issues a "Gold Stocks" and  "Silver Stocks" report. Some typical reports are posted below. Note how some days there is minimal activity and some days have significant activity. However, note the attention to detail. All bars are assayed and weighed to within thousandths of an ounce.

First, let's study the report from October 8, 2013. Click on it to enlarge it and notice that vault movements are all measured in thousandths of a troy ounce. For example, on this day Brinks received into their registered vault 1,699.940 troy ounces and JPMorgan saw 708.704 ounces removed from their eligible vault.

Below are two other reports, dated 9/30/13 and 10/17/13. Again, note the precision of the measurements as great caution is apparently taken to ensure that the metal is properly logged and accounted for.

So, now, here's where the fun starts. Back on Friday, we noted an unusually large addition to the JPMorgan eligible vault. The sheer size of it caught my eye and you can see it on the report below. Note the other reported vault movements that day and then see if anything about the JPM data catches your eye.

Hmmmm....While HSBC and Scotia posted the usual moves in thousandths of an ounce, the JPM eligible addition is a flat, round number. Not only that, the round number in question is 192,900.000 troy ounces. What is so significant about that number? Well, the generally-accepted number of ounces in a metric ton is 32,150. If you multiply that number by six, you get 192,900. So, last Friday, JPMorgan booked into their eligible account exactly and precisely six metric tonnes of gold. Now, maybe by some magical occurrence they weighed and assayed each bar and the total amazingly came to 192,900.000 but to me that seems statistically improbable. But with no access to the vaults we're left with simply taking their word for it.

Imagine my disgust shock when I saw the next gold stocks report on Monday. Not only did JPMorgan magically book in another precise and round number, the actual increase in eligible gold was reported as 96,450.000 ounces. You're probably pretty good with math so I imagine you've already figured out that that is precisely three metric tonnes. Willing (forced) to give JPM the benefit of the doubt on Friday, we can no longer do so here. EXACTLY SIX METRIC TONNES ON FRIDAY. EXACTLY THREE METRIC TONNES ON MONDAY.

And then we get to yesterday. After a non-event, empty report on Tuesday, what do you think we saw yesterday? Could JPMorgan have the audacity to report another round number multiple of one metric ton? Nope. They simply reported one metric ton! Again, nothing to the right of the decimal point. Just 32,150.000 troy ounces, exact and on the nose.

So what do we make to of this? We're supposed to believe that, over the last four days, JPMorgan has brought in EXACTLY 10 metric tonnes of gold into their eligible account. In precise and detailed fashion, this massive deposit of gold from a customer(s) measured out to be exactly 321,500.000 troy ounces. RRRrrrrright.....Only the most ardent Cartel apologist and disinfo agent would be willing to swallow that one.

Here's what I think is going on:

  • The deposits are bullshit. Either completely fabricated and falsified OR simple paper claims. It's one or the other due to the simple statistical improbability of three consecutive round numbers totaling exactly 10 metric tonnes.
  • Recall that back in 2007, Morgan Stanley paid $4.4MM to customers to settle a lawsuit brought by customers who had been charged storage fees on paper metal. http://www.reuters.com/article/2007/06/12/idUSN1228014520070612
  • Is JPMorgan pulling the same trick now? Given the laundry list of their other fines since 2011, I wouldn't put it past them. http://www.thedailybeast.com/articles/2013/05/08/jpmorgan-chase-s-crazy-fine-tally.html
  • If this isn't another JPM client-screwjy awaiting a lawsuit, then The Comex and, by extension The CME Group, is allowing JPMorgan to fraudulently goose their warehouse stocks ahead of the all-important December delivery period to give a false impression of solvency. The World Gold Council-owned BullionVault may not think that the lowest stocks since 2005 is a big deal but plenty of other folks due, most notably Jesse. He's been diligently tracking the daily changes for months. Click this latest update and be sure to review the charts: http://jessescrossroadscafe.blogspot.com/2013/10/tremors-and-warnings-in-gold-market.html
  • Lastly, the brazenness of the operation must be noted. No effort is made to conceal it. The CME Group simply reports the statistically-outrageous numbers and no one notices or cares. We're just supposed to believe that JPMorgan's eligible vault can nearly double in size in just over two weeks and that's all fine, dandy and business as usual.

Well, it's NOT business as usual. The extraordinary and counter-intuitive price raids, the massive depletion of the GLD, persistent backwardation in the GOFO rates and JPMorgan's cornering, 70,000-contract, NET LONG gold futures position all warn you that we are in uncharted territory and major changes are afoot. This eligible gold deception currently being employed by The Comex is just another indicator.

By the looks of it, the end of the fractional reserve bullion banking system is rapidly approaching. Keep stacking and prepare accordingly.

TF

November 4 UPDATE: 

In the past week, much has been made that the opinions stated above could be somehow construed as fact. Though I clearly began this piece with the disclaimer of "decide for yourself", some still seem to think this post needs a counter-argument. Since all of the Comex data is deliberately opaque and, in the words of The CME itself "not reliable", I figured I might as well give some attention to an alternate theory first supposed by Bron Suckeki of the Perth Mint. 

Bron thinks that the entire 10 mts of eligible stock can be easily attributed to 1-kg bars. OK, who knows? Maybe he's right. His primary points are below:

TF, which of these do you think are facts and which are opinions one could be right or wrong about:
1. Comex rules allow for 1kg bars
2. A 1kg bar weighs 32.15oz
3. 32.15 x 6000 = 192900
4. 192900 is therefore not statistically impossible

I'm not looking for an apology, but I think given the above facts, your original post requires a note to inform future readers that while you think Comex stocks are "bullshit", the round 192900 figure is possible and can't be used to prove the stocks are "bullshit".

So, anyway, there you have it. An alternate theory. Take it or leave it and, as originally stated, decide for yourself.

TF

219 Comments

Teach's picture

Second...

It really feels like the egg is starting to wobble badly.  I think November could be a very tumultuous month.  I am slowly pulling funds out of the bank... a security nest egg?..I just do not feel safe with sombody..gov't/banksters being the custodian of my (limited) wealth.  Better with it and the guns in the same house...

Thanks Turd..good input and analysis lately.  I am happy with the investment to be behind the paywall.

Turd Ferguson's picture

Thank you

MODERATOR

I hope you and all of the subscribers understand the need to make columns such as this one immediately available for public discussion.

Response to: Second...
Down Range's picture

12th

Kinda long so in case reading drops me from TURD!

Dawg

Patrancus's picture

4 score

still lurking for the turd

dgstage's picture

Will We Close Above

that 1350.00 mark today since we just broke it?

Turd Ferguson's picture

Crude chart

MODERATOR

tyberious's picture

that is the clearest

explanation of the Comex, that I have ever read!

Fatso's picture

Is this connected to the low oil price?

The price of oil seems very low to me in the mix of these things and with Saudi Arabia threatening major changes to their policies (perhaps the petro dollar).

Thanks

tyberious's picture

Just WOW!!!!!

US Dollar Valued In Gold Since 1718

jessescrossroadscafe.blogspot.com / By Jesse / 24 OCTOBER 2013

How many ounces of gold can $1000 buy?

The answer over time is instructive. Here is some knowledge about money.

It is remarkable how few economists really understand this, and what it means, what it implies.

Here is Paul Krugman’s opinion on the currency war and the US dollar in a recent piece called Godwin and the Greenback.    I think it speaks for itself, approaching the language of economic jingoism.

And he is certainly not the worst economic voice out there, which is what makes this so disconcerting.   At least he is not an austerian, those who would crucify the public for the sins of the one percent.

READ MORE

 
¤'s picture

The Age of Corruption & Disinformation

Yep, it's brazen but to be expected imho especially so after the recent and expected CFTC ruling that gave JPM and others a green light going forward.

We live in an era where rounding off 'error's' not only apply to numerical situations but also one where political or market circumstances and events are glossed over and reshaped (MOPE) that basically rounds off the truth.

The general public doesn't care and in all liklihood couldn't even comprehend what you laid out above or why it's important (or not).

The cartel and govt. knows the general population is clueless and with a general lack of a rule of law within govt. ( and the markets and banks etc.) they feel they can get away with almost anything.

They would be correct about that and that should come as no surprise to anyone. We haven't seen anything yet...but we will.

gazzmann's picture

Briliant

Thanks for the info Turd. Great stuff to chew on for us inexperienced in such matters, but are compelled to stack because we can criminality on the surface.

Ciscokid's picture

Gold and silver on the move.

Gold and silver on the move.

Stratajema's picture

The gold deposits are not

The gold deposits are not bullsh-t.  The problem is you've been hoodwinked by others into believing strong physical demand is creating a shortage.  We are 6 months into the bullsh-t spewed by Willie and others that there is a massive shortage.  What will they say 3 months from now?  That the shortage is continuing?  What a crock.  I've got more clarity on gold and silver by no longer listening to those people. 

Again, not one more ounce of gold will be purchased by me until the physical price separates from the paper price in the U.S.  There is no reason for the paper price not to be sub $1,100 in 6 months but will the price of physical follow it down?  IMHO, of course.

abguy4's picture

...life depends on it

1) G-r-r-r-reat post by The Turd

2) If you skipped-over the link posted by dgstage (post #1), go back and read it now.

And some one who can comment intelligently on it - Please do~! In the meanwhile, I'll be on the bathroom with the dry heaves.............................

http://thecommonsenseshow.com/2013/10/24/your-life-depends-on-literally-taking-your-money-out-of-the-bank/

silver10sguy's picture

Great Post Turd

Thanks Turd for a great post.  As others already mentioned that was very easy to understand and digest.  You are the best!   

Gold Dog's picture

A little math

The even ounces should occur once every 1000 deliveries on average....so:

1,000 X 1,000 X 1,000 = We have just witnessed a one in a billion occurrence!

That will happen, on average, every 2,737,850 years or so. Right up there with Cro Magnum turning into Homo Sapiens!

Your friend,

Dog

Whitecastle123's picture

Stratajema and

Herrhelmutt from Dusseldorf should form a  "I hate Jim Willie private club "" and keep to yourselves.   

Clarki Stomias's picture

This is Excellent

I agree with the other members, this is probably the cleanest write up on the Comex and on the current obfuscation by JP Morgan that I've seen.  As you've implied Turd, they're insolvent!   There's no way the Comex (or the CFTC) can't be considered complicit at this point. 

I have to print this one up and show it to my extended family as they continue to give either a collective eye roll or a glazed stare every time I try to explain the clear and present dangers of the fractional reserve banking system and in this case the gold market manipulation.  I'm tired of being called a tin-foil hat wearer when it is BLATANT!  Fractional reserves? Hell, Turd, you clearly reveal it to be FICTIONAL Reserves.   And as Sinclair and many others have pointed out, it's not just the gold market that is based on "Fictional Reserves" at this point, but the whole damned structure.  (I wonder how aghast we'll all be once true "mark-to-market" is revealed.)  What a horrifying house of cards.

We are frighteningly close to the end game.  Bravo, Turd!  In true Halloween spirit, that's the best "horror" (for it's implications) write up I think you've done.   I think even my family could understand this one, it's so straightforward.

Yeah, and hat tip to dgstage and his link as well.  Conspiracy or not, when this all goes down, God help us all.

Turd Ferguson's picture

"It's not bullshit"

MODERATOR

Thank you for the excellent, thorough and reasoned counter-analysis.

tmosley's picture

Man, I hate Jim Willie.  He's

Man, I hate Jim Willie.  He's such a big fat liar.  He smells bad too.

.

.

.

.

Now where do I go to pick up my check?  They stopped delivering mail to the bridge I live under.

Gold Dog's picture

AbGuy

We have been talking about this for years and it has been happening since Nixon closed the gold window.

Now that the solid rocket boosters are almost out of fuel we are in for some resetting of how things are done around here.

- I don't think that there is some master plan to enslave us all, my belief is that greed and a lack of discipline ran the show.

- Everyone seems to think that the next step is dictatorship, I doubt that, at least in these United States. Fragmentation into different countries is much more likely.

- My guess is that these new smaller entities,Colonies, will band together for the common defense.

- There will be a period of great turmoil that could last up to a couple of years during which we have to be ready to provide leadership in our communities. Most people will just be shell-shocked and looking for someone to tell them what to do. That's where we come in. We have mentally prepared ourselves and prepared for dealing with local ills at the local level.

- We must all sing from the same page during the turmoil. NO strongman and support NO ONE that does not follow the owner's manual....the Constitution.

- I have great belief in the ability of Mericans to adapt and thrive, given the opportunity to. Chicago burned to the ground before there was FEMA or any of that BS and was being rebuilt the next week....same with Atlanta. This won't be nearly as bad.

- 99% of the things we worry about never happen!

YF,

D

DayStar's picture

RE: The gold deposits are not

Makes you wonder what is fixing to go down when all of these purveyors of the dark side start peddling their wares after a period of silence.

DayStar

rl999's picture

Chinese purchases being recast into kilo bars - here too?

The story that the Chinese were taking delivery of everything available and than having it recast into kilo bars caused quite a stir.

Perhaps the criminals at the crimex got their marching orders and are following suit in preparation for the new monetary system being revealed?

Maybe it's easier to do business with 32.15 oz bars than 400 oz bars?

Maybe the success of the overseas exchanges that support physical delivery are causing these assclowns to rethink their business model?

Bollocks's picture

Enron and Lehman

never cooked the books did they?

So why would anyone else?

No, hang on ... ALL they EVER did was cook the books. Silly me.

SteveW's picture

What do you believe?

1 metric tonne is 32,150.747 troy oz and not 32,150. So when JPM reported receiving 6 tonnes why did they not use 192,904.480?

1. They don't use google to get the exact figure.

2. They just round off using the generally accepted 32,150 figure.

3. They don't care about alerting Turd with the xx,xxx.000 figure.

4. Turd takes this all too seriously and JPM is just messing around. After all the CME publishes these figures for entertainment value (information purposes), they are not guaranteed and any resemblance to real life might be unintended and entirely accidental.

Urban Roman's picture

Simple explanation:

They are now stocking the warehouse with those Chinese 1-kg bars, and they have 'em stacked on huge pallets that hold exactly 3,000 of them. And the Chinese bars are made to be uniform to within a milligram.

OK, I just made that up. Like the cosmologists with their big-bang universe.

AGAU's picture

Bullshit!

Could you let us know any where we can purchase and TAKE DELIVERY of gold at the current paper price?.

Urban Roman's picture

Orlov's latest ...

Off-topic a bit, but I'm just reading it. It's a good one.

The Sixth Stage of Collapse

"What use is a steering wheel without a car? Well, I suppose, if you are particularly daft or juvenile, you can use it to pretend that you still have a car, running around with it and making “vroom-vroom!” noises..."

When I read that sentence, I immediately thought of the Bernank, and Krugman, and the Keynesians for some reason. Even though that isn't what the essay is about.

eurobuddha's picture

chart resolution

Turd, old Hoss, i can't read the price on this low res image...can u please repost if not too much trouble.

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