For years, we've watched JPMorgan stockpile what
is alleged to be physical gold and silver in their Comex vaults.
However, something has changed over the past four months and we thought
we should bring this to your attention today.
First some background...
During the silver price run-up of 2011, JPMorgan
was seemingly caught flat-footed. They appeared to hold a massive paper
short position while simultaneously holding no visible physical
position. At the time, JPM did not have a Comex silver vault and, as the
CFTC-generated Commitment of Traders data showed at the time, the last
$10 of price surge was almost entirely due to a "commercial" short
squeeze. The most likely "commercial" being squeezed in April of 2011?
JPMorgan.
Also in the spring of that year, the was a
rapid approval for JPMorgan to start their own Comex silver vault.
Evidence of this can be found when we review how this vault came about
in March of 2011. This old link details how JPM was suddenly and quickly
approved to establish this new Comex silver vault:
https://seekingalpha.com/article/259549-will-...n-silver-shorts
After starting from ZERO in 2011, JPM has
quickly amassed a horde of Comex silver and now has a virtual
stranglehold and monopoly on this "market". As of last Friday, JPM's
Comex silver vault held 112.5 million ounces versus a total Comex vault
of 213.3 million ounces. This means that JPM now holds/controls nearly
53% of all silver backing the Comex silver paper derivative exchange.
To help you better understand the scope of this,
check these next two charts (click to enlarge). First, here's an old
Comex silver stocks report from June 3, 2011. Note the following:
- Prior to JPM's inclusion in 2011, there had only been FOUR Comex silver depositories.
- After the first 60 days or so, JPM had only brought in 750,761 ounces, all of it marked "eligible".
- The total amount of silver held in all vaults was just 100,535,272 ounces.
This next chart I found on Twitter over the weekend and it comes from the always helpful Nick Laird at target="_blank" www.goldchartsrus.com. It shows in dramatic fashion the rising dominance of JPM and their silver vault on the Comex:
JPM seems to have largely amassed this horde
through the steady acquisition of silver through the bi-monthly
"delivery" process on the Comex. If we check the records since 2015, we
see this play out. While only rarely issuing a contract, the House or
proprietary account of JPM has consistently stopped (taken) "deliveries"
since March of 2015. See below:
March15: JPM House stopped the
position limit of 1,500 contracts. At 5,000 ounces/contract, this
represents "delivery" of 7,500,000 ounces.
May15: 808 stops for 4,040,000 ounces
July15: 1,161 for 5,805,000 ounces
Sept15: 370 for 1,850,000 ounces
Dec15: 1,400 for 7,000,000 ounces
March16: 1,076 for 5,380,000 ounces
May16: 1,500 for 7,500,000 ounces
July16: 771 for 3,855,000 ounces
Sept16: 405 for 2,025,000 ounces
Dec16: 1,550 (50 contracts in excess of the 1,500 limit) for 7,750,000 ounces.
Adding this all together gives us a total
2015-2016 stoppage of 10,541 contracts for 52,705,000 ounces of silver.
Over the same time period, JPM House issued just 342 contracts for
1,710,000 ounces. So, on a NET basis, the House account of JPMorgan
accumulated almost precisely 51,000,000 ounces of silver in their Comex
Vault over the time period of 2015-2016.
This hoarding continued into 2017 when JPMHouse
stopped a whopping 2,689 contracts back in March. This represents a
"delivery" of 13,445,000 ounces and is clearly
WELL IN EXCESS of
the stated Comex front and delivery month position limit of 1,500
contracts. We wrote about this at the time and even went so far as to
file a complaint form through the CFTC website. You can read all about
it here:
target="_blank" https://www.tfmetalsreport.com/blog/8243/m...lver-deliveries
Well a curious thing has occurred in the time
since. After illegally stopping 2,689 contracts in March, the House
account of JPMorgan stopped a grand total of
ZERO Comex silver contracts in May and, thus far in July, they've once again stopped a total of ZERO.
Now why would this be? Does JPM finally feel as if they have enough
silver? Did their violations back in March result in a slap in the
wrist from the CFTC? Who can say for certain? What's clear, however, is
that with a physical horde of 107,000,000 ounces in their eligible
vault, JPM now has enough silver to physically settle and cover 21,400
Comex contracts should they ever begin to get squeezed again as they did
in 2011. (This of course assumes that the entire 107MM ounces is
owned/controlled by the JPM House account.)
Adding more intrigue to the question, however,
is what we're also seeing in Comex gold. In 2015, the House account of
JPM was actually a NET issuer of Comex gold contracts. Some months they
issued and some months they stopped (took "delivery") and the result was
an issuance of 1,109 Comex gold contracts for NET loss of 110,900
ounces of gold. This changed in 2016 though as the JPM House account
ended up with a NET stoppage of precisely 8,000 Comex contracts for
800,000 ounces.
This continued into 2017 with February seeing
771 stops for a total of 77,100 more ounces. And then a curious thing
happened here, too. The House account of JPM had a total of
ZERO
activity in April. No stops and no issuances. And then, when June came
around, it happened again! No June gold stops and no June gold
issuances! What the heck??
And so here we are. After being an active
collector and hoarder of "physical" gold and silver through the
bi-monthly Comex delivery process, the activity of the House account of
JPM has suddenly come to a grinding and complete FULL STOP. And the
question is:
WHY? Why, after participating in every
gold and silver "delivery" month for years, has the JPM House account
suddenly ceased all activity? Again, are they "full"? Has the CFTC
slapped a penalty upon them for repeatedly exceeding delivery month
position limits?
Most importantly, what if anything might this
mean for price? Has JPM conspired to keep prices low for years so that
they could acquire metal as inexpensively as possible? Maybe. And, now
that they appear to be "done", might price finally be allowed to rise?
Again, maybe.
Unfortunately, all we can do is speculate. The
actual answers will very likely never be known as the only thing that
remains constant in the world of the paper derivative pricing scheme is
the deliberate opacity of the process.
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Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found target="_blank" at TFMetalsReport.com, an online community for precious metal investors.
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The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.
