More Deception at The Comex

219
Thu, Oct 24, 2013 - 11:25am

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: https://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: https://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. https://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. https://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: https://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

    About the Author

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    turd [at] tfmetalsreport [dot] com ()

      219 Comments

    ¤
    Oct 24, 2013 - 11:56am

    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
    Oct 24, 2013 - 11:59am

    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
    Oct 24, 2013 - 12:04pm

    Gold and silver on the move.

    Gold and silver on the move.

    Stratajema
    Oct 24, 2013 - 12:07pm

    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
    Oct 24, 2013 - 12:12pm

    ...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.............................

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

    silver10sguy
    Oct 24, 2013 - 12:16pm

    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
    Oct 24, 2013 - 12:21pm

    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 abguy4
    Oct 24, 2013 - 12:23pm

    Stratajema and

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

    Stratajema
    Oct 24, 2013 - 12:28pm

    "It's not bullshit"

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

    tmosley
    Oct 24, 2013 - 12:38pm

    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.

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