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The King of Silver and Gold Flees

By Adam English | Monday, July 29th, 2013


J.P. Morgan has finally bowed to the masses and will abandon its throne of silver and gold.

Bearing the modern equivalent of pitchforks and torches, a handful of outspoken whistleblowers, investors, and journalists have begun shedding light on the highly questionable manipulation of markets and commodities by J.P. Morgan and the other megabanks.

The whole fiasco is the result of a lousy patchwork of half-baked laws.

The wall between banks, investing companies, and commodities was dismantled when the Glass-Stegall Act was dismantled in 1999. As a result, Morgan Stanley (as it was called at the time) and the Goldman Sachs Group, Inc. aggressively moved into both sectors. At the time, the law allowed them to keep their commodity businesses — as long as they were in place before 1997.


The Federal Reserve made the situation worse in 2003 by broadening the rules. The Fed thought commodity trading was complimentary to financial activities and, as a result, a logical sector for banks to enter.

The results have been disastrous, with the evidence against the banks and this law piling up higher by the day.

The Fed began reviewing the implications of its decision last week.

The unintended consequences and implications of misguided laws and regulations have become the defining aspects of the commodities market. Politicians can no longer ignore this situation, and are now openly questioning in Congressional and Senate meetings why banks are in the commodities market in the first place.

Just last week, I was compelled to point out the manipulative exploits of J.P. Morgan in the silver market. HSBC and Goldman Sachs were also mentioned.
All of the megabanks have jumped into commodities futures, warehousing, and high-frequency trading of paper gold and silver. This is in addition to holding shipping companies, operating power plants, and managing pipelines, electrical grids, and other basic infrastructure. Any market large enough to distort was turned into a profit center.

But the track record of the banks has been abysmal. J.P. Morgan in particular is behind a number of misdeeds and a good deal of deception...

Repeat Offender

One look at J.P. Morgan 's resume, and you have to wonder who in their right mind would let them near commodities to begin with.

Of course, this is an article and not a book, so we'll just stick to recent history...

We'll start when J.P. Morgan inherited a massive amount of silver shorts priced between $20 and $21 from the Bear Stearns bankruptcy deal the U.S. Treasury Dept. approved. Together with HSBC, the two megabanks covered 85% of all silver shorts.

If the free market was allowed to set the price of silver during unprecedented monetary easing would turn the acquisition into one of the worst deals in its history... So J.P. Morgan made sure that didn't happen.

By maintaining the massive short position and utilizing high-frequency trading, JPM could buy up silver at a discount and artificially induce others to sell and keep the price low. Same with gold.

However, that started to change this year, and J.P. Morgan threw gold investors under the bus to further its strategy... 99.3% of the physical gold sales at the COMEX between the beginning of February and the end of April was from J.P. Morgan alone.

At the time, it looked like just another power play in the market to capture gains and force others to panic sell until a better entry price was available.

Since then, selling has not subsided. J.P. Morgan even removed 66% of its COMEX-eligible gold from the market a couple weeks ago, leaving just 46,000 troy ounces when it had over three million in the market two years ago.

Now things look a bit different — but just as manipulated. This massive reduction, coupled with COMEX-eligible gold for delivery across the board and massive demand from Asia, is driving a huge wedge between the reality of physical gold prices and paper trades through exchanges.

The physical gold J.P. Morgan will retain after removing it from the sale rack is poised to skyrocket in value. If it is getting out of the market, it might as well bolster its holdings in the process. If it destroys the market at the same time, so be it.

The Warning Shots
In the last month, we've seen a massive fine handed to J.P. Morgan and renewed interest in revoking the rules that allowed J.P. Morgan and the megabanks to dominate commodities.

The $400 million fine for giving false information to state power grid operators and collecting money for not running power plants was the first real hit J.P. Morgan has taken for manipulation in years.

Reuters just reported that the Department of Justice has sent letters to at least two firms seeking information for a preliminary inquiry into complaints that companies involved in metals storage may have inflated prices earlier this week.

Bart Chilton, head of the Commodity Futures Trading Commission, has even publicly stated that silver prices are subject to "fraudulent influences," and the parties behind it should be prosecuted. On July 25th, he said:


This whole area of banks owing the physical, warehousing and delivery mechanisms of commodities is one that policy makers need to thoughtfully consider, and soon. Banks getting back to being banks and making loans to businesses and individuals seems like the best course of action. Perhaps that will happen without any policy changes, although I have definite doubts.

You and I have heard plenty of talk from legislators in the past, and we're starting to hear it again about this situation...

We have no reason to think it'll come to anything (consider the number of the bankers jailed for causing the Great Recession...) when they rattle their sabers in front of a camera. But when J.P. Morgan positions itself to get ahead of the curve, well, that's different.

The company's move shows that it believes the politicians won't like what they see. There is no other reason for them to abandon what has been a source of massive profits.

The 10 largest Wall Street banks generated about $1 billion from physical commodity units in 2012, and about $5 billion from commodity derivatives and financing.

J.P. Morgan has the daunting task of unwinding $6.7 billion in total positions.

Going Forward

If everything goes as planned (or as publicly stated), J.P. Morgan will be out of the commodities business within a couple of years.

And we'll know within weeks or months if the other megabanks will follow the first rat off the sinking ship.

What that means for you and me could be a whole new world... It could also be nothing different.

The U.S. government can only legislate and control a portion of the global markets, and it has a terrible track record rife with unintended consequences. If the move is entirely voluntary, the demand for legislation will subside and it's likely nothing will happen. The door will stay open for the megabanks as well.

One thing we can count on is tightened liquidity in commodity markets. It could be negligible if J.P. Morgan and the other megabanks just spin the business into new firms. If they sell their commodities desks and positions to other firms or close up shop, it'll sap the market of liquidity for months or years.

In my opinion, we should welcome the potential for short-term pain if it means a truly free market.

We'll all be better off without being subject to the whims and decrees of the self-appointed kings of commodities — along with the heavy taxes they collect from us through their schemes and manipulations.

Take Care,

Adam English

PS sorry for all the above without links. They were from emails

From Ed Steer

The U.S. Mint had a very decent sales report yesterday...and if one uses the past as prologue, this may be the last sales report of the month. They sold 10,500 ounces of gold eagles...4,500 one-ounce 24K gold buffaloes...and a very chunky 950,000 silver eagles. Silver eagles sales this month so far total 4,406,500. Only 65,000 ounces of gold eagles/buffaloes have been reported sold, so that puts the silver/gold ratio for mint sales at just about 68 to 1. That's the biggest sales ratio number that I can remember posting.

Silver Vault for 200 Tons Starts in Singapore as Wealthy Buy

http://www.bloomberg.com/news/2013-07-28/silver-vault-for-200-tons-starts-in-singapore-as-wealthy-buy.html

From Ed Steers colum

A (Photovoltaic) Silver Bull in China

Early this month, big news came out of China. It may have gone unnoticed by some investors—and there's really no reason why it would have been covered extensively by mainstream media—but it's important if you're a silver investor. China raised its target for solar generating capacity to more than 35 gigawatts (GW) by 2015, a stunning increase of 67% above the previous target.

China's State Council announced on July 4 that installed capacity for solar electricity would grow about 10 GW per year until it reaches the newly set target. The country's previous target was 21 GW; installed capacity in 2012 was about 7 GW, so this would translate into a 400% increase. Moreover, if one looks at the rate at which it keeps raising the target, we may well see even more solar capacity by 2015—and quite possibly two times that by 2020.

Why does this mean to us as precious metal investors? A simple answer would be that growing demand could crimp supply and push on prices. But let's take a deeper look to see if that's the case…

I've already posted a couple of news items in this column during the past week about this issue...and here's a fresh look from Jeff Clark over at Casey Research. It's a must read.


http://www.caseyresearch.com/articles/a-photovoltaic-silver-bull-in-china

Nice links as usual - More bed time reading.

Have you noticed the chunky moves in some of the uranium plays lately?///



S.

OOops!!...



We can hope for a false break, but would want to see a reversal straight away.

S.

Meanwhile Miners may be about to lose a line in the sand unless it can recover from it...



S.

Gaz - I had a feeling that they were at such an advanced stage that they were not bothered now about their existence being revealed. And your post shows what stage they must be at to allow all their secrets to be released...

'6. The power of our resources must..... remain invisible
- until the very moment when it has gained such strength that no cunning or force can undermine it. '

If you look at the facts, No matter what information is revealed it makes little or no difference. Just look at how the story has developed for the heroes such as Bradley Manning Snowden and others, the majority of folk couldn't give a fig, perhaps they are under the mind control programme that was mainly developed under Mengele?...

I am sure you are aware of his Springmeier' and Wheelers work in this field...
http://www.fichier-pdf.fr/2012/08/28/springmeier-wheeler-deeper-insights-into-the-illuminati-formula/springmeier-wheeler-deeper-insights-into-the-illuminati-formula.pdf

S.

A bounce from the line but is it sustainable?...



S.

Thanks to you both for some pre bedtime reading (after the pub quiz)
- 338 pages may be another 3 am(er)

Interesting collection

Just how much is "investor demand" in the... big pie... of gold demand
- source - world gold council
(suprised me)





Whilst the above youT - mentions BofE supplying a possible 1,300 tons into the market - by way of leasing other peeps gold.

The talking heads - credit punters throwing in the towel with GLD - for origins of meeting the huge physical demand as a supplement to comex supply.

Lets check how much GLD has contributed to that theory







Or looked at another way - GLD outflows as a proportion of - total demand






Or how about "JUST" what GLD's outflows would contribute to .....ONLY what goes through the
- Shanghai gold exchange





Not looking so good on the hymme sheet song
- the demand is being met to a large degree - by gold given up by GLD investors


In fact to put it in context - GLD outflow -vs-comex outflow, for example






I personally connect those dots

- that comex invent-ory is crashing
- GLD is not suppling as much as the talking heads - suggest...towards demand
- there is a lot of missing gold - not accounted for as being supplied by Comex inventory, plus GLD
(even if we accounted for newly mined gold - indications above are that there would still be a "shortfall of supply against demand)

And if - the LBMA market is as active as the more visible market (who seem to be running on fumes)

- then the REALLY BIG ....deals "of volume" which pass thro' the LBMA....must be depleting their Invent-ory by "really big" multiples too as compared to the visible market.....and must have run out of fumes

- and be running on perhaps
- 1,300 tons and counting...and counting
- BofE custody gold leased into the market
- & Residing in Hedge Fund Manager Kaye's - underground Shanghai vault
- and....Mrs Singh & Mrs Li's necks
- with little prospect of being "physically" returned at the end of the gold lease.

Nice work Gaz - In an easy to read and digest format. Cheers!

Good luck at the pub quiz.

I found this site recently that aids in improving cognitive skills, I must say after 5 weeks I have noticed a marked improvemnet in spacial awareness, brain speed and other mental attributes. Just thought it may help your quiz nights ))

http://www.lumosity.com/app/v4/dashboard

S.

$Sivers 'Harami' (Small bodied candle within the lower section of the previous candle) looks to be threatened by a lower close today (the last day of the month). A lot will depend on the FOMC meeting and what jaw-boning the Bernank does with regard to QE...



Maybe we get another tail below the trendline?...



S.

Sahara - thanks for the link - added to my to-do list, as I need to register (to do's - are more a short novel than a list).

Charts - Still look as tho' we are on the birth of a trend. Wonder how long the labour pains will continue. Hopefully when the labour waters break
- it will be bulls rushing to buy surf board to ride the tidal wave of short covering
- rather than buying... floatation aids

In the famous paraphrase style of "Legendary Louise Yamada" - it could be up, it could be down, we may remain range bound, or drift sideways for a while. There could be some volatility too along the way too.
If only you could bet... that she was right :o)

Talking of bets - Think I may have done a boo boo son wise on that aspect.

He mentioned last night that he might buy a grands worth of silver coins, excited at the prospect of £500 profit if silver went to $30. Discussed the merits of holding some tangible money to get thro' any total SHTF scenario,
- and cautioned him on manipulation, buy sell spreads, vat etc etc

Casually mentioned as a throw away remark as he was leaving - if he felt silver was going to £30 before the end of the year, & he bought some Dec call options for around $27 it would cost say £3/400 for about 20,000 ish and a $30 expiry would kick out around $60,000.

After he had gone...regretted saying it...without adding a lot more.
- somehow think the $60,000 will have got the brain cells ticking & I will be getting a text £500.... bet placed !

If he loses - dad in the bad books
- and if it pays off - I will have a son perhaps deluded that he is gifted...and ...on that one ...many early win new traders can testify to the fact ...the rest... is often history (as was their former nice house :o)

Just something to keep your eye on


70 Straight Days: Treasury Says Debt Stuck at Exactly $16,699,396,000,000

According to the Daily Treasury Statement for July 26, which the Treasury released this afternoon, the federal debt has been stuck at exactly $16,699,396,000,000.00 for 70 straight days.

That is approximately $25 million below the legal limit of $16,699,421,095,673.60 that Congress has imposed on the debt.

The value of U.S. Treasury debt instruments circulating in the public has increased $53.267 billion since May 17--even though the Treasury says the debt has remained exactly at $16,699,396,000,000.00 during that time.

How could the value of extant U.S. Treasury securities increase by $53.267 billion during a 70-day period when the federal government’s debt subject to the legal limit has remained constant at $16,699,396,000,000.00—just $25 million below the legal limit?


http://cnsnews.com/news/article/70-straight-days-treasury-says-debt-stuck-exactly-1669939600000000

Another country bans import of gold

Countering devaluation: Pakistan government slaps temporary ban on gold imports

http://tribune.com.pk/story/584352/countering-devaluation-govt-slaps-temporary-ban-on-gold-import/

Thanks to Alasdair Macleod we found out about the 1200 tons of gold that has vanished.


Bank of England refuses comment on huge discrepancy in custodial gold reports

http://www.gata.org/node/12859

Maybe this demonstrates
- how many people can get thro the exit ....in a market...
- short squeeze

Right click picture
- click on.. open in new window
- short gif should start automatically
- lol

Talking of short squeezes (this is getting like links in the BBC news)

Our man in Singapore - Hedge fund manager Kaye

“The short interest in GLD right now is incredibly high.
- It’s roughly 30 million shares,
- and the key point here is that this is taking place while the shareholder count keeps contracting.
- The shareholder count is down to just over 300 million shares,
- so the short interest is roughly 10%.

So in my speak
- the bullion banks are now net short almost 10% of GLD.
- That’s several billion dollars worth of gold.
- and it's 30 MILLION - of GLD shares....effectively double counted - so 30 million shares
- not backed by the physical gold.

And in my mind begs the question
- if the talking heads are correct that punters - are throwing in the towel hand over fist in GLD
- then why......are they having to....borrow GLD shares

My suspicion - borrow - the 10 million GLD shares
- redeem them for.... physical
(The shareholder count keeps contracting because the physical gold keeps getting redeemed)
-- and "hope" you can return it,.... some time later
(when the borrowed shares - need to be returned)

Will that give rise to the same type of answer that the Germans got
- when they asked the Federal Reserve to send Germany’s gold back to them,
- which is essentially,..... ‘You can’t have it,
- but we will give you .....
- a very, very tiny portion of the gold you are... supposed... to have stored with us,
- and it will take... 7 years for you to get it.

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


So whist circumstantial m'lud
- Chavez asked for his gold
- The boys liberated Libya's Gold
(apparently Gaddafi had imprisoned it - without charge or trial)
- The FEDy tells Germany it can't have it's own gold back - but they will air mail an oz at a time over 7 years
- ABN Amro defaults on paying out punters allocated gold - and switches to fiat settlement
- Von Greyez when trying to move client gold out of Swiss banks - is given every excuse under the sun - "sorry you can only have XXX Tons - due to money laundering ..restrictions" .....being a real classic
- He also mentions court gagging orders re - class actions in the courts - to recover allocated deposits
- The Indian Gov - blocks gold imports - unless (it's still a bit woolly on the details)...... x amount is retained for re-export (traders are struggling to get the woolly rules clarified....causing a log jam)
- The B of E loses 1,300 tons of - custody gold in it's new online app (into the market :o)
- refiners working 24/7 and still cite long delivery times
- Kaye citing his smelters sourcing supplies from anywhere...including central banks
- Comex registered and eligible invent-ory falling off a cliff
- the Morgue apparently not making its may deliveries - until July
- The LBMA etending delivery time by 66% (Previously 3 days...now 5 days)
- and now....
10 million GLD shares being...borrowed (& no doubt redeemed into physical then into the market)
- and that's just what springs to mind !!

Update - as per Snurkles link - Pakistan now bans import of gold

So obviously
- as the talking heads confirm - a surfeit in Gold supplies
- clearly in evidence......hence the fall in the price