Why Is JPM Hoarding Silver?

There's a lot going on and I'm diligently trying to connect all of the dots.

In fact, there are so many dots to connect, I don't know where to start. I guess we'll start with price. Surprise, surprise! The Bernank tipped his hand yesterday regarding QE∞ and really moved the markets. Stocks, bonds, the metals...nearly everything has rallied. The only victim was The Pig, which immediately fell over 2 points, which is an historic, monstrously large move. I don't ever recall seeing a POSX move of that size before. Amazing!

The metals have rallied but the shorts remain in firm control, at least for now. We got a bit of a panic squeeze in the afterhours late yesterday but, once London opened, things we're jammed back down. (Why anyone in their right mind buys gold futures between midnight and 2:00 am NY time is beyond me.) The charts look better and it's always nice to see some green on the screen but don't go getting carried away just yet. Momentarily clearing $1300 and $20 is nice but we really need at least $1350 and $21 before we can begin to get excited. Until then, just keep stacking your physical, a little bit at a time. For example, I ordered 50 ASEs late Tuesday. Glad I did! smiley

OK, let's dig into the weeds a little bit and see what we find. LOTS of talk about the negative GOFO rates out there...which continue negative for the 4th consecutive day...which is unprecedented. What the heck does this indicate? My friend, DenverDave, does as good a job as I've seen explaining the implications. If you haven't yet, please take the time to read this: http://truthingold.blogspot.com/2013/07/gofo-explained-and-why-its-now-very.html

So, what other indications of shortage and backwardation are out there? Well, we've got this from Harvey:

"Tonight, the Comex registered or dealer inventory of gold falls below 1 million oz to 985,969 oz or 30.66 tonnes.  This is getting  dangerously low.  The total of all gold at the comex (dealer and customer) falls again and registers a reading of  7.095 million oz or 220.680 tonnes of gold. JPMorgan's customer inventory remains constant at  136,380.609 oz or 4.24 tonnes.  It's dealer inventory also remains  constant at 401,877.493 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory. The total of the 3 major gold bullion dealers( Scotia , HSBC and JPMorgan)  in its Comex gold dealer account registers only 26.03 tonnes of gold. The total of all of the dealers falls to 30.66 tonnes!! And tonight, Brinks dealer inventory falls to a record low of only 4.18 tonnes of gold!!"

Let's see...The Banks only show 30.66 metric tonnes of registered (approved and ready to be delivered) gold. This may sound like a lot but it's not. Check these two charts below:

These two charts came from Jesse's site and he's got a terrific piece on the subject that you should read by clicking here: http://jessescrossroadscafe.blogspot.com/2013/07/registered-gold-on-comex-breaks-million.html

So, inventories are extremely low and falling. The Bullion Banks (at least the U.S.-based ones) are now demonstrably long Comex gold futures. And now we have negative GOFO rates which seem to indicate a true tightness and lack of desire to part with physical gold, even in the face of an easy short-term profit. What the devil is going on here? Are we finally seeing the entire fractional reserve bullion banking scheme come apart at the seams?? It certainly appears that way.

And now to the title of this post. It appears, on the surface at least, that JPM is aggressively hoarding physical silver. Uncle Ted and Andrew have been all over this for some time now. Let's review. First Andrew.

Again, even if you're not an active trader, being a member of "Turd's Army" is well worth the money. Besides an ongoing daily commentary with instant notification of any trades he makes, Andy writes up a weekly commentary which he publishes every Sunday. This is, hands down, the most important and valuable newsletter you will ever receive. If you'd like to sign up, click here: http://www.coghlancapital.com/daytrades-application?ak=turd_army. Anyway, Andy has been noting to subscribers that, for about the past three weeks, there has been a large, institutional buyer appearing at each and every London silver fix. Because of the size of the orders, this buyer could only be a Bullion Bank and he has deduced that is likely JPM. So, if Andy is correct (and I have absolutely no reason to doubt him), then suddenly JPM has taken to quietly acquiring as much physical silver as they can.

Now, add to that what has been going on this month at The Comex. Uncle Ted (another simply outstanding newsletter you should take: http://www.butlerresearch.com) has been all over this since the first of the month. Back on Saturday he wrote this:

"I believe the statistics from the first six days of the July COMEX silver futures contract provide enough data for attention.  The standout feature for the first week of deliveries against the July silver contract indicates that JPMorgan has taken roughly 90% of the metal offered for delivery, or a total of 1637 contracts out of a cumulative total of 1828 delivered so far. In turn, of the silver contracts stopped or accepted by JPMorgan, 90% (1479 contracts) were for JPMorgan’s own house or proprietary trading account. In other words, JPMorgan took delivery of roughly 7.4 million ounces of silver in the COMEX warehouses for their own benefit and risk".

He followed that up yesterday with this:

"A quick note on JPMorgan’s unusual taking of delivery of silver in the current July contract I first mentioned on Saturday. In the two delivery days since that review, JPMorgan has taken (stopped) an additional 369 contracts, 350 of which were for the bank’s house or proprietary trading account. Of the 2220 total contracts delivered so far in the July COMEX contract, JPM has taken 2006 contracts, including 1829 contracts for the bank’s own house account. Over the past two days, customers of JPMorgan have delivered close to 200 silver contracts as well, raising the question if JPMorgan is double dealing. Another point is that the 1829 contracts (9.145 million oz) that JPM has taken in its own name is above the level of 1500 contracts that COMEX rules dictate can’t be exceeded in any one delivery month by any single trader.  Hey – have you ever heard of a rule or regulation that JPMorgan couldn’t evade? Me, neither."

There are still about 1,200 July contracts that remain to be settled so we'll see where those go...but what the heck is going on here? Of the 2,220 July13 contracts that have been settled so far this month, JPM has claimed over 90% of them. Further, 90% of those have gone directly into JPM's own house account!

So we've got JPM soaking up as much Comex silver as they can without disturbing the price downtrend AND we've also got JPM appearing each day at The Fix, buying up as much silver as possible there, too. Connecting these dots leads me to this conclusion:

JPM is getting out of the silver manipulation game. Perhaps they've been warned by the CFTC. Perhaps they simply see the writing on the wall. Again, it's impossible to say. What we do know is:

  • During this 9-month decline, they've trimmed their naked Comex short position from roughly 35,000 contracts down to approximately 15,000 contracts.
  • The startling, surprising and historic rise in the "other commercial" gross long position from 40,000 to over 60,000 contracts has likely prohibited them from reducing their naked short position to zero.

So, JPM sees the writing on the wall and is left with three choices:

  1. Cover the rest into rising prices. They tried that in 2011 and it didn't work so well.
  2.  Go the "potato" route and simply default on delivery. http://www.tfmetalsreport.com/blog/4348/simplot-scenario-silver
  3. Continue to cover the naked shorts as much and for as long as you can BUT also acquire as much physical silver as possible so that you actually can physically deliver against all your short paper if it comes down to it. If you're short 10,000 contracts and suddenly those 10,000 longs stand for delivery, it would greatly benefit you to actually have the 50,000,000 ounces on hand. Settle it out and it's over.

Again, this is just a hunch...an attempt to connect some dots. Let's watch this situation closely as we head through the month and see if it continues to play out.

Just a couple of other items. First, Pat Heller has written an excellent piece called "Where's The Gold?". You should read it: http://www.coinweek.com/bullion-report/wheres-the-gold/ And, speaking of "where's the gold?", our CBC documentary from back in April is finally set to make its American premiere on Saturday. It will debut on The History Channel known as "H2" and it will be shown at 10:00 pm EDT Saturday night. http://www.history.com/schedule/h2/7/13/2013

Lastly, I had a 30-minute conversation with Felix Moreno of GoldMoney back on Tuesday. They've now released it as a podcast and I think it turned out pretty well. It's worth a listen, even if I do say so myself.

That's all for now. I hope you have/had a great day!

TF

245 Comments

Turd Ferguson's picture

Nuts...I completely forgot to mention

MODERATOR
  1. The 20-day MA for Sep13 silver is $19.95. Watch that level closely, too.
  2. This week's CoT will be fun once again. For the reporting week, silver was down 15¢ and its OI was down 1,300. However, gold was up $4 and its OI was up 21,000.
Hunt brother's picture

Repost from June 27...bottom at 18.20 that evening

  • Silver, 21 to 9 to 49 to 18.5 to 150 by Hunt brother

    2 weeks 56 min ago

    Nietzsche was right: adversity makes you stronger

    It is the quote used by many to bolster resilience in the face of adversity. But the words “what does not kill me, makes me stronger”, by the German philosopher Friedrich Nietzsche, could have scientific merit too, according to research.

    Nietzsche was right: adversity makes you stronger
  •  
Turd Ferguson's picture

Thank you

MODERATOR

Very much appreciated.

Until you've done it, the challenge of managing and writing such a busy website all by yourself is difficult to comprehend. It's why the critics here and at ZH don't bother me anymore. They have no idea and are simply just pests.

Response to: @Turd
Turd Ferguson's picture

I also like this...A LOT

MODERATOR

The darkest places in hell are reserved for those who maintain their neutrality in times of moral crisis. - "Bertrand Zobrist” 
― Dan BrownInferno

ancientmoney's picture

GLD should be interesting today . . .

Been draining as price has dropped.  Will it drain even on a decent rise? 

Under normal circumstances, would expect increases in GLD sales/tonnage when price rises . . .

benque's picture

Morgue silver

Just a thought...maybe they're hoping to deliver it as "gold equivalent" to those awaiting delivery of "real" gold, and who refuse to take fiat.  Can they do that?

SRSrocco's picture

WOW... NEVADA GOLD PRODUCTION DOWN BIG TIME

The USGS released their most recent data on gold production in the United States, and I have to say, Gold production declined substantially in Nevada.  This is above and beyond the declines coming from the Kennecott Mine in Utah:

Nevada’s Gold Production Down in a Big Way

achmachat's picture

hehe

in other words... Switzerland IS the darkest place in hell?

Bollocks's picture

Pretty Amazing

In 40 days David Icke manages to raise just over £300,000 (about 1/2 a million dollars) for his live news TV station, from ordinary people (ie no big sponsors, single-injections of big money). He originally set a target of £100,000.

http://www.indiegogo.com/projects/the-people-s-voice

This could be good. Launching in September.

Missiondweller's picture

Santelli is great but..

you know he is still being held "on a leash" to some extent.

I'd love to see him UNCHAINED!

He's the only thing worth watching on CNBS.

Missiondweller's picture

@bengue

Those were by thoughts too. Silver is "poor man's gold" and maybe would be slightly more acceptable than a cash payment that may be rejected when the COMEX & LBMA go bust and can't deliver gold. At least silver has a correlation with gold, as opposed to cash settlement.

ancientmoney's picture

@Benque re: Morgue silver . . .

"maybe they're hoping to deliver it as "gold equivalent" to those awaiting delivery of "real" gold, and who refuse to take fiat.  Can they do that?"

--------------------------------------------------------------------------------

There's no provision for that, but again, what difference does THAT make when it's JPM?

I'm thinking they expect the GSR to close the gap substantially, and they'd like to participate as fully as possible.  Any longs wanting COMEX silver delivery will be settled with cash or SLV-shares.

And, JPM is custodian of SLV, so when push comes to shove, JPM owns all the silver held there, as per the prospectus--provided they pay for it at the prevailing fiat price.  Ha-ha!  What a set-up!!

s1lverbullet's picture

Wow!

Rick came so close to telling everyone what is really going on... on CNBC?!?! Never thought I would see the day.

ancientmoney's picture

@Turd re: Almost There . . . Santelli . . .

Agreed, he stopped just a eyelash short of blurting it out plainly, but anyone who pays attention (Turdites are in this group of luminaries) knows by reading between the lines that he actually did say it when he said maybe, just maybe it (QE) "benefits the treasury."

Thanks for the thoughtful silver analysis.  Silver gets short shrift in the gold-centric PM world, but I think silver is the real screamer once its let loose of paper shackles.

benque's picture

Thanks Missiondweller & ancientmoney

As Turd says above, the morgue cares nothing for rules.  I suppose my "can they do that?" question was rhetorical, but not declared as such.

I appreciate your thoughts on this, and any others which may be posted.

Also, achmachat; don't forget Sweden.  As well, a great many in USA, England, Canada, Ireland, etc, etc, etc, wanted to remain neutral in WWII, until events overtook them.

Oops, Ireland was a very special case (despite my Irish ancestory!).

dropout's picture

Its Close. Very Close.

The time is ripe. The fundamentals say so.

The cream on the cake? The fourth day in a row for a negative GOFO rate. Historic. Unprecedented.

Never happened before. One day? Yes. Two days? Yes. Three days? No, but close. Four days? Never before.

Do we get a fifth day tomorrow? Time will tell. The 10 yr bond rate rising. Debt is costing more. 

Unemployment? Worse.  

Anyone remember the "Misery Index" from the eighties? Anything over 20 points was considered very bad.

Misery Index is unemployment rate + inflation rate 

Shadow stats says the 'true' unemployment rate is over 20%, while the 'true' inflation rate is north of 8%

You do the simple math. Its very bad, no matter how you cut it. The time draws nigh.

achmachat's picture

Hard Numbers from the Perth Mint

I actually prefer Bron when I can hear him... maybe it's the Australian accent.

This interview is very interesting if you're looking for some numbers from the Perth Mint "hub".

here's the link to the page:

http://bullmarketthinking.com/perth-mints-suchecki-were-seeing-the-weak-hands-in-gold-coming-out-now/

AGAU's picture

re santelli

CNBC and its muppets are about as popular as pork chops in a synagogue right now!  maybe they are slinking into shape changer mode?  they have no credibility. I listen partially to those sycophantic snotty oiks, Joe Kernen, Betty Boo Boo and Ross Dorkin coming into the office and they are nothing but  a heehawin donkey fest, They had the Donald with a "syrup" on top on the other day I almost puked in my ashtray, jeez what a total prick I am surprised he could sit down with Betty Q's snout up his arse!

I am surprised Santelli hasn't bailed out - you can almost feel his frustration

ps

for the further education of my american cousins a "syrup" is cockney slang for Syrup of Figs -a wig  - not sure if trumpy's is a syrup? but surely nothing could grow like that naturally ! 

Hopefully  good wind will get that lot flapping one day and pile drive him into the ground !

 I wonder if any of his apprentices  have pointed out that his coiffure resembles a stack of pig shite in the farmyard, bet that  would get ya fired   -  har

sorry - off topic  hic!

Turd Ferguson's picture

Try this link instead

MODERATOR
Turd Ferguson's picture

A source told me...

MODERATOR

...to expect a sharp rise in the GLD inventory today/tomorrow. We'll see...

benque's picture

AGAU

Please keep your remarkably astute comments coming....and the alcohol flowing.

Visit me anytime!  I've got the glasses.

SilverLeaf's picture

Highlights from Jim Sinclair meeting in Vancouver

Who made it out to Santa's meeting in Vancouver yesterday?  It was a great session. Jim was unbelievably energetic in answering questions non-stop for 4 hours. He was also gracious, and more articulate than than he's come across in his recent audio interviews.  If you get the chance to go see him, make the effort to do it.  I ended up taking 6 pages of notes, and thought I'd share a very small sampling of key highlights for your benefit:

The meta theme was "get out of the system" (GOTS). Jim thinks there are three foundational points in time we're dealing with:

1. The Great Flushing  - in 2009, when Lehman was allowed to fail and it broke the chain being able to net out legacy over the counter derivatives (those written from 1991 to 2007).

2. The Great Leveling - anticipated late 2015 to early 2016, when they steal depositors assets en masse to recapitalize the banking system. Jim thinks (hopes) we have 18 months before that event, but concedes it might happen as early as tomorrow. The key thing to understand is that you need to GOTS before that happens.

3. The Great Reset - Jim thinks the BRICs will force a reset of the financial system (re-pricing of gold and establishment of new reserve currency) in late 2016, but it will be initially rejected by the Western world, including the US and Canada, and could drag out to 2020.  It'll be an extraordinarily positive event in the end - "The end game is not the end of the world. It's the beginning of the new world."

The key takeaways to prepare for these events:

  • Protect your assets by GOTS as soon as possible. We might have 18 months, or we might have 1 day left. It's somewhere in that range, and time is running out by the day.
     
  • Set aside enough CASH in your possession to cover your living expenses (including your mortgage payments) for at least 6 months. The financial system may be disrupted for a period of time during the leveling, and if you can't meet your debt obligations, the banks will foreclose on you to grab as many real assets as they can. You need to either pay off your debt (a free and clear title is GOTS), or you need to make sure you're not going to end up in technical default on your mortgage payments before the system stabilizes
     
  • Jim doesn't envision a Mad Max preppers scenario - The global bank holiday will be shorter than what we saw in Cyprus (probably 3 days). There will be supply chain disruptions in the aftermath, because after the banks steal the funds of businesses, charities, and regular depositors, business will have trouble meeting payroll (including your salary) and paying for supplies, so you'll see spot disruptions in transportation and product supplies for maybe 90 days. Having access to food, cash, essentials, etc to last you though that period is the reason to prep - not because we'll have entered into a period of permanent anarchy.
     
  • The next crisis will be engineered - Just like the Great Flushing was an engineered event (though the chaos that ensued immediately afterwards wasn't planned), the Great Leveling and the Great Reset will be controlled demolitions. They know what needs to happen, are putting the legal and logistical apparatus in place, and are waiting for the right moment to pull the trigger. This is part of why he thinks that, though it will be a trying and difficult time, it won't lead to Mad Max world. We've got maybe six months of hardship to deal with in the aftermath of the Great Leveling, and GOTS and preparation will help you protect yourself and your family.
     
  • Banks that required a bail-out in 2009 are the most likely to force bail-in - Find out if your banks received bail-out money in 2009. If they did, GOTS because it's indicative that they have a massive festering black hole on their balance sheets that will re-emerge during the next crisis. The next time, they'll bail-in to recapitalize these banks, using your deposits to do it. Step out of the system and/or move your assets to safer institutions like sound local credit unions.
     
  • Gold Cycle - Jim believes that the gold market is bottoming this week (silver maybe next week). If that's true, we have a bull wave to look forward to until August 2014, at which time we'll see one more massive beatdown. That will be the last one before gold is fully emancipated from the system. So...expect gold/silver correction to be done shortly, expect us to achieve new highs in gold and silver by August 2014 (somewhere between 1900 or 2400 on gold), and then expect another forced wave down (maybe gold to 1600). That's it. After that, we go into the Grand Reset. "I'm not going to try to guess the price of gold in a world where it's not manipulated. But it's going much higher than I ever expected (by 2020, when the Great Reset happens)."  For context, the highest public prediction I've seen from Jim is $50,000 and ounce, in a very recent interview.
     
  • Things will be better from 2020 on - Between now and then, expect conditions to be difficult to varying degrees as we stumble forward into the brave new world. "It'll  be what you've already seen (since 2009), but with a multiplier."

This are just a few of the most important highlights from the session - like I said, I took 6 pages of notes. Hope it'll help some of you who haven't had a chance to see Jim in person and one of these Q&A sessions. It was time well spent. Personally, even though everything may not unfold quite the way that he sees it (nobody can fully predict the future), I feel more informed and prepared for the major events that are likely coming our way.

zman's picture

@ancient

That's a good question, if the gold price goes higher, will investors return back into GLD? If so, where will GLD get the gold?

I think it would be very strange if gold goes higher and GLD remains at the same tonnage.

elpicador's picture

Assuming that...

as Harvey Organ stated several times that somebody (China?) with deep pockets is on the long side, scenario number 3 would be quite possible. Asking for delivery while banks are massively short would be like an act of war.

''Continue to cover the naked shorts as much and for as long as you can BUT also acquire as much physical silver as possible so that you actually can physically deliver against all your short paper if it comes down to it. If you're short 10,000 contracts and suddenly those 10,000 longs stand for delivery, it would greatly benefit you to actually have the 50,000,000 ounces on hand. Settle it out and it's over.''

ancientmoney's picture

Snippet from Goldseek article . . .

"The "Waterloo" of gold price management is the physical market. That is what makes gold different from purely paper products like Facebook. That's why it is not possible to control the price in the long term without a ready source of physical gold to meet this demand. Physical buyers can and do terminate events such as the ones we've just seen. They've been doing it for at least the last 12 years, every time. The reason for that is the "ready supplier" is running out of gold."

----------------------------------------------------------------------------

The April takedown surprised everyone when phyzz demand exploded, and hasn't let up since.  This article is from then (April) when Sprott did his math and essentially pinpointed 4500 tons of gold dumped into market by Fed/treasury since 1991. 

With GOFO negative 4 straight days, it may be the tell that there is essentially no more gold to deploy by the MOTU.

http://news.goldseek.com/GoldSeek/1366140621.php

argent rampant's picture

GLD & SLV...

... inventories are supposed to up as more shares are purchased. So, of course, they will. Don't worry - the custodians are very trustworthy!wink

DirkDirkler's picture

Santelli

Is he going to clean that up after...?

argent rampant's picture

@Silverleaf

Thanks, very much, for sharing that!yes

tyberious's picture

Deadline Approaches for Silver Investigation

I'm calling on everyone who has been fighting the battle to free our markets from manipulation to demand the CFTC answer this question...
 
"Does the CFTC plan to file charges against the Silver Market riggers prior to the September 2013 deadline or will they let the Statute of Limitations expire on the investigation allowing the perpetrators walk free?"
 
The answer can change the course of the battle for our freedom.
 
Deadline Approaches for Silver Investigation
 
Here's the email addresses of the current Commissioners:
 
ggensler@cftc.gov
bchilton@cftc.gov
somalia@cftc.gov
mwetjen@cftc.gov
 
It is VERY important to let them know that we are still here and we are still WATCHING!
 
Send them an email demanding an answer and send them this article. Ask others to do the same. Every email makes a huge difference.
 
May the Road you choose be the Right Road.
 
Bix Weir
 
 
zman's picture

Sinclair

He predicts only a 1 year rally to ($1900-2400 oz) and then another smack down to $1600 oz, wow, talk about a very pathetic move, very discouraging to say the least.

He also says then we get a "reset" by 2020, that's a long time away if you ask me, bottom line, Mr. Gold has turned very tame with his predictions, sounds like he is not that bullish at all.

Gold was at $1900 in Sept. of 2011, and he is calling for lower prices maybe 4 years later, maybe he is rethinking his investment thesis, what is so exciting about these moves, I don't see it.

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