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

Wizard's picture

Calm Your Mind and Steel Your Nerves

I believe that this is just the beginning salvo in a long line of character assassinations to come.

When the message begins to actually get through to the public that shines light on the crimes of the CME and Crimex. Like any other criminal institution they will begin to attack the messengers first.

The closer to home the message hits the more violently they will react.

W

ata's picture

Healthy diet lecture

A doctor was addressing a large audience in Oxford ....
 
"The rubbish we put into our stomachs should have killed most of us sitting here, years ago.  Red meat is full of steroids and dye.  Soft drinks corrode your stomach lining.  Chinese food is loaded with MSG. High transfat diets can be disastrous and none of us realizes the long-term harm caused by the germs in our drinking water.  But, there is one thing that is the most dangerous of all and most of us have, or will eat it.  Can anyone here tell me what food it is that causes the most grief and suffering for years after eating it?"
 
After several seconds of quiet, a 70-year-old man in the front row raised his hand, and softly said, "Wedding Cake."

Charles S. Hamlin's picture

Dagney

When you say "buying half today, half tomorrow".  Is this a normal periodic buy or why the urgency?

-Chuck

Kcap's picture

The tipping point is approaching...

It ALWAYS happens when the powers try to hide something or deny something so voraciously and then begin to talk about it or expose it, even if they are trying to belittle or destroy a notion of it. 

We are now closer to resolution than we are distant from it.

Kcap

Turd Ferguson's picture

Just got an email from Andy

MODERATOR

Here's what it says:

"An article contrived by CPM Group's Jeffery Christian based upon spuriously sourced information and published this evening on Kitco News is attempting to question my 35+ year banking history and is totally inaccurate and I will be responding to this shortly. As most know, I have brought Jeffery Christian’s integrity into question on numerous occasions and this is no more than an attempt to discredit my work in exposing the unallocated bullion banking system of which he is a primary architect."

Bsong's picture

If I'm not mistaking, this

If I'm not mistaking, this story has been through the cycle once before.  Jeff calls him out at a conference at least once a year.  At this point I have to wonder why Jeff is beating a dead horse.  Though, I'd like to be able to verify AM past, knowing as much would not change my perspective on precious metals and the trustworthiness of current markets.   Heck, maybe they are keeping each other in the spotlight.  AM now has a record and clients that can verify his trading strategy.  What gives? 

ag1969's picture

I wish everyone would remember...

...that Jeffrey Christian is a fucking criminal!  I don't know the truth here but I am certainly not going to believe anything a criminal tells me.

@KoosJansen's picture

A Letter To Andrew Maguire

A week a go I wrote this letter to Andrew, and posted it on my website. http://koosjansen.blogspot.nl/2013/10/a-letter-to-andrew-maguire.html The next day he emailed me and said he would like to have Skype chat to get this cleared. In the Skype chat he said he was misinformed by his Chinese contact and would rectify all. Then we chatted a bit more on markets and finished with that we would stay in touch. I will send him an email to ask about these allegations. Koos Jansen

ag1969's picture

Bsong

You are talking about a guy who spends his days propping up the dollar, and you can't believe he is beating a dead horse?  LMAO

Bollocks's picture

Hey Bugzy

Check out SPICES wink

I started to learn to cook with spices several years ago and there's something magical about them. Ever wondered why the population in of one of the poorest countries in the world, India, always look really healthy? Regardless of the slums many of them live in, they always look healthy. You can see it in their eyes and skin.

They always cook using spices. There really is something magical about them.

Cumin, turmeric, coriander, cardamom, cloves, fennel, cinnamon, chilli, nutmeg, tamarind (they are the main ones, but the list goes on) plus lots of ginger and garlic.

There's that saying "you are what you eat". Well, I don't agree totally with that, but the health of the body is definitely a reflection of what you eat.

I've found cumin and turmeric are particularly special.

Oh, and organic wherever possible.

Learning about spices and cooking with them has been a revelation for me - and it's really quick and easy.

smiley
 

Byzantium's picture

Andy

When TPTB want to discredit somebody, they pick their timing. I am wondering the significance of discrediting Andy at this time.

Also, I am convinced that he is one of the good guys, and an asset to our side, so it is natural that they want to pull him down. Look at his message, present or pending, and therein is what they likely do not approve of.

¤'s picture

apples and oranges

Nice to see AM responded promptly.

One person stating the other person is discrediting them because they discredited the other one first is a circular side show of words to some degree.

The whole self-interest "topper" aspect to a lot of this is part of the blogosphere MO. Sensationalism sells.

Byzantium's picture

but....

I do wish that Andy would learn the meaning of the word 'exponential.'

Demand is apparently going 'exponential,' every time he gives an interview. It undermines his message. 

meluaufeet's picture

Paul Coghlan / Andy Maguire

I'll let Paul Coghlan work this out.

He must of used due diligence, prior to hiring Maguire.

I also assumed the Max Keiser would have made a couple of phone calls considering his vast rolodex, prior to putting him on his show.

Mr. Coghlan had been responsive to a couple of emails I've sent to him in the past. Seemed like a straight up guy.

We will soon find out... no need to break a sweat over this. Christian will lose substantial credibility if this turns out in Andy's favor.

I will certainly send his friends at the CFTC an email, if Andy holds up and Jeffrey does not.

Kcap's picture

"a primary architect"....

of the unallocated bullion banking system.....ohhhh ho!!

This is setting it up for the blame game to begin...and why do I have a feeling the manipulators are about to get spanked?

Its getting warmer in the bullion kitchen....

Kcap

silverwhere's picture

nuff said about Jeff Christian in one line

"He founded the company in 1986, spinning off the Commodities Research Group from Goldman, Sachs & Co and its commodities trading arm, J. Aron & Company".

.

Dear Jeffrey Christian:

This next line you wrote about yourself really cracked me up. Here I thought us Christians were all about the humility. Well, maybe not all of us. Right Jeff? Honestly, have you no shame?

.

"Mr. Christian is considered one of the most knowledgeable experts on precious metals markets, commodities in general, and financial engineering using options for hedging and investing purposes".

.

Good one Jeff.

http://www.cpmgroup.com/who-we-are/our-team/jeffrey-m-christian

.

Vermilion's picture

Harvey Organ has been noting

Harvey Organ has been noting these incidents of 'round number' deposits for years.

I understood that each bar out of an official refinery carries an exclusive bar number. If this is the case, then surely a warehouse receipt carries the relevant bar numbers on them? 

pm_newbie's picture

smells fishy to me too

Well said flyinkel!

ag1969's picture

So here we are

Talking about:

1) Jeffrey Christian

2) The round number deposits that seemingly represent paper transactions of gold and silver.  And yes Vermilion, Harvey has been pointing these out for years.

Was it not Jeffrey Christian himself who said 100 paper oz trade for every physical ounce?  Jeffrey Christian is the architect of an enormous paper ponzi, one that I believe is collapsing.  Desperate men do desperate things.

Bsong's picture

Ag69. Exactly!

Ag69. Exactly!

Vermilion's picture

Why is it so odd for JPM to

Why is it so odd for JPM to phone up a refiner and place an order (on behalf of a customer, possibly sovereign) for, say, 2 tonnes, or 4 tonnes? The refinery might say, 'We have 25,545oz in stock at the moment, but if you wait 10 days we can deliver the 2 tonnes in totem.' JPM tells them to deliver it all in 10 days, and books it in as 4 tonnes, which is the correct amount they receive.

Where's the conspiracy?

ag1969's picture

Vermilion

I believe it was categorized as a statistical improbability, not a conspiracy.  In addition, it is only a conspiracy until proven true, and as aforementioned, Christian himself admitted it is a Ponzi.

StevenBHorse's picture

I demand exactly 31250.000

Do this look like a precise process?

I am shocked that they can't pour to the .000 ounce every time.

beardeus's picture

Obamacare penalty question

It seems that the IRS can't go after you, yet, for not getting insurance or paying the penalty. All they can do, as far as I know, is take from your refund.

So if I owe $100 and my refund is $100 then I wont get anything back. Right? Easy enough. What if I owe the same $100 and my refund is $0. Can they take the $100 from next year's tax return or no?

This is confusing to me. Does the penalty add to next year's tax bill?

Whitecastle123's picture

Hey Bollocks

Post some recipes please.  My wife can only cook with a microwave and that's no joke. 

rats's picture

How The Economic Machine Works by Ray Dalio

I have just watched the youtube clip by Ray Dalio and found it really fascinating and actually making me question some of my original assumptions. Would be interested in what other people think of it

Turd, Ray Dalio and Martin Armstrong are three people whose comments I really respect the most in the internet but it seems all three are diverging

Turd Ferguson's picture

This is helpful

MODERATOR

Found it linked over at The Doc's site.

 

 

Spartacus Rex's picture

@ Bollocks- Spices

WTH? You left out the very Best Spice Of All! 

bullion only's picture

99% of the things you worry

99% of the things you worry about never happen. Well it's the 1% that does happen that could kill you.

RT

¤'s picture

I never liked this song...

But I do like the music of Sir Eric...

At Bray Film Studios in Windsor, England for MTV Unplugged

"Signe" (Clapton) -- 0:0
"Before You Accuse Me" (McDaniel) -- 3:14
"Hey Hey" (Broonzy) -- 7:12
"Tears in Heaven" (Clapton/Jennings) -- 10:41
"Lonely Stranger" (Clapton) -- 15:55
"Nobody Knows You When You're Down and Out" (Cox) -- 21:20
"Layla" (Clapton/Gordon) -- 25:10
"Running on Faith" (Williams) -- 29:39
"Walkin' Blues" (Johnson) -- 36:05
"Alberta" (Traditional) -- 40:00
"San Francisco Bay Blues" (Fuller) -- 44:55
"Malted Milk" (Johnson) -- 48:20
"Old Love" (Clapton/Cray) -- 52:00
"Rollin' and Tumblin'" (Waters) -- 59:35

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