As I’ve mention previously JPMorgan is still stopping
(taking) silver deliveries in its own house account. In the May COMEX
futures contract, they’ve taken over three million ounces so far. It still
looks like JPM will take another million ounces or so before the delivery
period is over. This is in addition to the 7.5 million ounces the bank took
in the March delivery period.
Another standout development in recent weeks has been the withdrawal of 5
million ounces from the big silver ETF, SLV. This large withdrawal would
appear to be a big buyer converting shares into metal for the purpose of
acquiring physical silver and avoiding the 5% ownership reporting requirement.
I believe this is the work of JPMorgan and represents the mechanism by which
the bank has amassed the bulk of the 350 million ounces I claim it has
acquired over the past four years.
The U.S. Mint sold 783,500 Silver Eagles in just two days after going 4 or
5 days with no sales. Then the Mint reported a scant 50,000 additional coins
sold over the next two days. This is precisely the erratic level of sales
that indicates the presence of a big buyer. I can’t certify that the big
buyer is JPMorgan, but everything I look at points to them.
The Canadian Royal Mint reported sales last week its 2014 sales of Silver
Maple Leafs and the same pattern that has characterized the U.S. Mint was
clearly revealed. Sales of silver coins hit a new record, with more than 29
million Silver Maple Leafs sold. The big buyer of Silver Eagles has also been
accumulating Silver Maple Leafs. Over the past four years the big buyer has
bought, at least 30 million ounces of Canadian Maple Leafs and 75 million
U.S. Silver Eagles totaling more than 100 million ounces of silver in bullion
coin sales alone. I’m convinced JPMorgan is the big buyer.
How in the world can JPMorgan eventually sell hundreds of millions of
ounces of silver without flooding the market and causing prices to crash?
This is what JPMorgan does as a regular part of their business – accumulate
and then liquidate massive market positions before most people get out of bed
every morning. It is second nature to them. In my opinion, this silver will
be sold before most people realize they bought it in the first place. Buying
350 million ounces of silver was the hard part, selling it will be a snap.
The big buyer is exploiting a loophole in the law that requires the Mint
to produce to whatever the demand might be. So JPMorgan artificially
depresses prices via short sales on the COMEX and then requests that the US
Mint sell it all the Silver Eagles it can produce. It doesn’t care if it is
paying $2 over the spot price, JPM wants all the silver it can get its hands
on. But what about selling the coins I claim JPMorgan has acquired? The coins
will not be sold as coins, but melted into 1,000 ounces bars. In fact, some
of the 100 million+ ounces of coins may have already been melted and cast
into good delivery bars. Considering that the coins are the same purity as
1,000 ounces bars, melting is a simple and a low cost process.
At the end of 2007, when the price of silver was less than $15, but close
to the highest price it had been in 25 years Bear Stearns, assumed the role
of the biggest silver and gold short when these positions were transferred
from AIG. From the end of 2007 to March 2008, the price of silver rose to $21
and gold rose from $800 to $1,000. Based upon the size of the short positions
that Bear Stearns held the investment bank had to come up with more than $2
billion in margin money. Bear was unable to do so and the U.S. Government
arranged for JPMorgan to take over Bear Stearns and its massive COMEX short
positions in silver and gold.
With the cooperation from the federal government, JPMorgan was able to
turn silver (and gold) prices sharply lower into year end 2008 and made well
over one billion dollars as a result of falling metals prices. Thus, they
were able to greatly reduce the short positions inherited from Bear Stearns.
JPMorgan then repeated the process of selling short great additional
quantities of COMEX short contracts on metals price rallies buying back those
short positions when prices fell. JPMorgan’s profits from the short side of
COMEX silver and gold, amounted to hundreds of millions and even billions.
This process was repeated by JPMorgan in COMEX silver until the fall of
2010, when silver began to rise in earnest due to a developing physical
shortage that drove prices to nearly $50 by the end of April 2011. On the run
up, it must have become clear to JPMorgan that a physical silver shortage was
developing and for the bank to try to fight it with additional paper short
sales would be futile. Therefore, two decisions were made; one, it would be
necessary to create such a large break in silver prices so as to crush the
momentum of the price rise and two, the developing physical shortage proved
that silver was destined to blow sky high in time and JPMorgan should
position itself accordingly. The big break in prices started on May 1, 2011
and broke the back of the silver price. Less visible is the evidence that
JPMorgan began to acquire the biggest physical silver stockpile in history.
1. In little more than a month, as a result of the big break in silver
prices staring on May 1, 2011, some 60 million ounces were liquidated from
the big silver ETF, SLV, as a result of plain vanilla selling by investors
who sold their shares in reaction to plunging prices. When net selling occurs
in SLV, metal is automatically redeemed from the trust on a mechanical basis.
The shares were sold and the metal was withdrawn from the trust as prescribed
by the prospectus. That doesn’t mean the metal was dumped on the streets of
London or ceased to exist. The metal fell into the ownership of someone and
the most likely candidate was the entity that arranged for the selloff in the
first place. The entity which stood to gain the most by the selloff was
JPMorgan. They picked up their first 50-60 million ounces as a result of the
May 2011 silver smack down.
2. Pressed for space to store the silver it planned to acquire, JPM opened
its own COMEX warehouse in April 2011 and from zero ounces in 2011, that
warehouse has turned into the biggest COMEX silver warehouse of all with
nearly 55 million ounces on deposit. The start date proves intent by JPMorgan
to acquire silver.
3. In 2012, JPMorgan physically transferred 100 million ounces of silver
from its own custodial warehouse for SLV to the Brinks warehouse in London,
leaving ample space in the former SLV warehouse to store 100 to 200 million
ounces of silver that would come to be owned by JPMorgan and that would never
require public disclosure. This is the most plausible explanation for why
JPMorgan would move the silver to the Brinks warehouse. All the movements of
metal out of SLV over the years, reeks of JPMorgan converting SLV shares to
metal to be stored in its own warehouse in London on an undisclosed basis. An
easy 200 million ounces can be accounted for in this manner.
4. The unusual and unprecedented turnover of physical silver in the
COMEX-approved silver warehouses that began in April 2011 suggests to me that
JPMorgan has been causing the movement in its quest to acquire physical
silver. An easy 100 million ounces acquired by JPMorgan can be deduced from
the more than 750 million ounces turned over in the COMEX warehouses over the
past four years. How hard would it be for JPMorgan to “skim” 100 million
ounces off a turnover of 750 million ounces?
5. The recent acceptance of more than 10 million ounces on COMEX futures
deliveries and the physical movement of most of that metal into the JPM COMEX
warehouse is a mere fraction of the total amount of silver JPMorgan has
acquired over the past four years, but it is clearly the most transparent and
may point to JPMorgan reaching the maximum amount of physical silver it
intends to acquire, indicating we may be close to when the bank decides to
let silver prices rise.
I’m using the number of 350 million ounces as what JPMorgan has acquired,
but the real amount may be in excess of 500 million ounces. I’m being
somewhat conservative in saying 350 million ounces because I’m worried that
those who deny that JPM has acquired any physical silver heads might explode
if the number is closer to half a billion ounces. I’m not looking for anyone
to lose their minds, but to understand what these facts mean.
Ted Butler
