The Comex Delivery Charade
We attempted to explain this in yesterday's podcast but it seemed as though this data needed a written post in order to be truly understood. Thus, we give it a try today.
First, just a quick reminder of what the terms eligible and registered mean. Source: http://blog.milesfranklin.com/miles-franklin-q-a-eligible-vs-registered-gold
Eligible category means that the gold meets the exchange requirements. Eligible gold essentially means that the gold is stored in COMEX warehouses. It is being stored in the COMEX warehouse for a private party or the vaulting/bullion bank, itself. It is NOT immediately available for delivery to contracts.
Registered gold means that the gold is fully available for delivery to longs who stand for bullion delivery. This gold has been certified to meet the exchange standards for purity and size. Registered gold is deliverable or available for delivery to a long contract holder standing for bullion delivery.
Next, here's a reminder of how August Comex gold deliveries played out. Our final summary was posted last Friday: http://www.tfmetalsreport.com/blog/7099/august-gold-delivery-update
Though there were 9,215 August gold contracts still open at contract "expiration" on July 30 and 8,295 still open the next day July 31, First Notice Day, the Comex ultimately reported just 5,113 deliveries for 511,300 ounces of "gold". But that's not the story here. Instead, we want to focus on how The Banks, particularly JP Morgan, manipulate the gold vault data to maintain the illusion of delivery and legitimacy.
The delivery month of August got off to a slow start with just 343 contracts "delivered" as of August 3. The next day, August 4, the CME released their daily "Gold Stocks" report for activity as of August 3 and it is posted below. Please take a good look. (Click to expand)
Note the exact amount of gold that JPMorgan showed in the registered vault: 98,970.886 troy ounces. This was only enough "gold" to physically settle and deliver 989 August contracts. And now here's where it gets interesting....
On the night of August 4, The CME/Comex posted delivery notices for 2,828 contracts...of which 2,750 were supposedly "delivered" from the House (proprietary) account of JPMorgan. Again, see below:
This caught the eye of a few analysts, yours truly included, because as noted above JPM only showed the ability to deliver 989 contracts. How were they going to manage these deliveries?
Nearly every analyst thought they had their answer the next day, August 5, when the CME released that day's Gold Stocks report. As you can see below, JPM had reclassified 276,049.092 troy ounces fo gold from eligible to registered. Problem solved, right? Issue 2,750 contracts one day. Reclassify enough gold for 2,760 deliveries the next. At the time, even ZeroHedge fell for the scam: http://www.zerohedge.com/news/2015-08-06/jpmorgan-helps-comex-avoid-gold-depletion-concerns-boosts-registered-gold-78-overnig
However, and though every other analyst looked away and moved on to the next topic du jour, we kept watching because we've long suspected that this entire Comex metal delivery process was nothing but a charade and fraud of unallocated metal and paper warehouse receipts. As fate would have it, we didn't have to wait long for some confirmation.
The daily CME Gold Stocks report from August 7 is shown below. Note that, despite the alleged 275,000 ounces of gold deliveries that JPM posted three days earlier, the JPM registered vault hadn't changed. In fact, that day, JPM actually reclassified some "gold" back from registered to eligible...the opposite of the movement that had satisfied everyone two days earlier. Be sure to note the amount...143,550.418 ounces moved back from registered to eligible.
Then, rather amazingly even though JPM had already issued 2,750 contracts from their House account AND they went on to issue another 1,756 from the Customer accounts, the total JPM registered vault didn't show a single change...no movement of even one ounce...for the rest of August and, as of Monday, the JPM registered vault was still claiming to hold 231,469.560 ounces of gold.
Finally, on Wednesday, the curtain was finally pulled back and the charade was revealed for all still watching...which appears to be only us at TFMR. Below is the CME Gold Stocks report for 9/2/15. Note that JPM attempted to slip past another reclassification, this time moving 89,425.481 ounces back from registered to eligible.
OK, so now let's do some math...
JPMorgan began the delivery month of August with just 98,970.866 ounces of "gold" in their ready and available for delivery registered vault. They then added 276,049.092 ounces to the registered vault on 8/4/15 and this brought their total registered vault up to 375,019.978 ounces. Two subsequent reclassifications back to eligible have brought the JPM registered vault back down to 142,044.079 ounces.
So, versus one month ago, the JPM registered vault has grown in size by 43,073.193 troy ounces and it has only grown by the exact amount remaining after the two, subsequent reclassifications. No "gold" has moved at all and there was clearly an attempt to deceive made by JPM early in August!
Remember, the House Account of JPM allegedly delivered 275,000 ounces of gold on 8/4 and, over the course of the month, the Customer Account of JPM allegedly delivered another 175,600. That's 450,600 ounces of gold that should have been moved from JPM's vault and yet...NOTHING.
Worse, JPM clearly sought to deceive and mollify critics of the process by reclassifying 276,000 ounces of gold from eligible to registered on 8/4. Not only was this gold never delivered, it was just systematically moved back to eligible after everyone stopped paying attention. There is no doubt that this was done deliberately by JPM in order to convince analysts that enough gold was available to satisfy all of JPM's August delivery demands. Once we all looked away, JPM quietly moved the "gold" back to eligible, no doubt ready to pull the same trick in October or December if necessary.
And one more important point. Go back up and check the total vault of HSBC on the first report dated 8/4. Note the size of the total vault was 4,815,090.453 ounces. Now note that, as of yesterday, the total HSBC vault still stood at 4,725,815.903 ounces. It's only down because of an 88,849 ounce eligible withdrawal back on 8/26. Otherwise, HSBC would still be at 4,814,672.503 total ounces. See below:
Al the while, the House Account of HSBC allegedly stopped and took delivery of 1,548 contracts in August (154,800 ounces) while also making 166 deliveries (16,600 ounces) from their Customer accounts. All of this and yet their total Vault never changes during the month?!?
Look, we'll cut to the chase...
THIS IS ALL A CHARADE AND A SHAM. Proven again by the clear effort by JPM in August to mask and hide the fraud by cleverly moving some eligible "gold" back and forth to registered during the delivery month. There is no actual gold being delivered. The entire delivery process is nothing but a shell game of unallocated metal and paper warehouse receipts. However, it is only this alleged delivery process that gives the paper derivative Comex any legitimacy. If the activities of August prove to you that metal delivery on the Comex is nothing but one, big scam...then how can anyone claim the Comex pricing derives a fair and true price?
The simple answer is: You can't. This fractional reserve, overleveraged and unallocated paper derivative scheme is a fraud of the first order. One day, it will all collapse under the shear weight and magnitude of its deceit. Until then, we wait. Patiently stacking true physical metal at deeply discounted levels until the day comes when fair and true value is finally reflected in "price".