Why is JPM Hoarding Gold?

Last month, we asked why JPM was hoarding silver. Now, with August gold deliveries just underway, is it time to ask why they are hoarding gold, too?

The silver hoarding question was asked on July 11. At that time, JPM had absorbed nearly 90% of the July Comex silver deliveries, primarily for their own or “house” account. That trend did, in fact, continue through the entire delivery month and when the totals were finally tabulated, JPM had stopped 3,040 of the 3,444 deliveries for July. That’s 88.27% of the total! It gets even better. Of the 3,040 that JPM took down, 2,824 went into their own house account. That’s 12,140,000 ounces of silver (377+ mts) and 82% of all Comex silver deliveries for July. To JPM. Into their own house account.

The full post from July 11 is here: http://www.tfmetalsreport.com/blog/4830/why-jpm-hoarding-silver [1]

So now here we are into the delivery period for August gold. In just the first two days, there have already been 1,963 total contracts delivered. (3,960 stood on FND and there will likely be at least another 3,000-4,000 more that will show up during the month. Harvey always keeps track of the numbers so you can follow along there.) Of the 1,963 contracts delivered last Thursday and Friday, JPM has stopped 1,466 or 74.7%. Additionally, of these 1466, 1,206 have gone directly into the JPM house account. So, if you’re keeping score at home, JPM has stopped to their own account 61.4% of the August deliveries…and the month has only just begun.

If you want to see these numbers yourself, click here: http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsYTDReport.pdf [2]

Now, of course, there’s lots of time left in the month and maybe JPM won’t stop even one more contract over the next three weeks…but…still…they took for themselves 82% of all the July Comex silver deliveries and they’re already on a pace for 61% of all August gold? Seriously?? Hmmm.

Well, what else is going on? Are there any other data point “dots” that we can connect?

• JPM is sitting very tight with their Comex stocks. Very little change for the past two weeks. Their total registered gold is 390,000 ounces but their total eligible gold is only 46,262 troy ounces or just 1.4 metric tonnes.
• All Comex gold is extremely low at just 7,000,000 ounces. See chart below.
• The GLD continues to be drained. Another 2.41 mts (77,000+ ounces) were sucked out just last Friday, bringing the Thursday-Friday total to 8.71 mts or 280,000 ounces. JPM is one of the “Authorized Participants” which can liquidate the GLD at 100,000 ounces a throw. How much of these recent withdrawals or, for that matter, how much of the 431 mts withdrawn YTD have flown directly into JPM’s hands?

…And here’s something interesting….The GLD “inventory” had been steady at 927.35 metric tonnes for over a week, from 7/24 until 8/1. Then, on Thursday and Friday of last week, it fell 280,000 ounces. Let’s see…August Comex delivery also began on Thursday and continued Friday. So far, there have been 1,963 contracts delivered for 196,300 ounces. I’m sure that’s just a coincidence…

And here are the charts referenced above. Thanks to Jesse! (http://jessescrossroadscafe.blogspot.com/2013/08/comex-registered-gold-inventory.html [3])

OK, let’s get back to out list.

• Gold Forward rates in London (GOFO) have remained negative now for 20 consecutive days. The previous record was 3 days and that occurred in 2008. Negative GOFO implies extreme physical tightness and rates are nowhere near moving back to positive.
• And some traditional “backwardation” has finally crept into the Comex boards. Your closing prices for Friday are:

GCY00 (Cash)    1,312.26s
GCQ13 (Aug ’13)    1,310.6s  
GCU13 (Sep ’13)    1,310.2s    
GCV13 (Oct ’13)    1,310.3s   
GCZ13 (Dec ’13)    1,310.5s   
GCG14 (Feb ’14)    1,311.6s
GCJ14 (Apr ’14)    1,312.6s

Admittedly, it’s not much but it shouldn’t be there at all now that August is past FND and into its delivery period. We’ll have to watch this closely.

• The most recent Bank Participation Report showed that the bullion banks are now net long an astonishing 20,701 contracts. NET LONG! (http://www.tfmetalsreport.com/blog/4824/amazing-cot-and-bpr-gold [4]) The next BPR is due this week. I wonder what it will show???
• And keep in mind that Uncle Ted (http://www.butlerresearch.com [5]) has been diligently tracking and calculating JPM’s position within this larger category. In what has to be the single most important factor going forward, Ted estimates that JPM has used this year’s beatdown scheme to completely flip their net position in gold futures. From a net short position estimated near 50,000 contracts last February, Ted has concluded that JPM is now net long approximately 85,000 contracts! That’s a 135,000 contract flip and their net position of +85,000 long gives them concentrated position of 25.3% of all Comex gold open interest, after removing the open interest related to spread trades.
• IF Ted is correct, then JPM has effectively “cornered” the Comex gold market. Not even The Hunt Brothers at their peak of influence in 1980 held this sizeable and concentrated a position in futures contracts.

So put it all together and whaddayagot? Suffice it to say something far more complicated than CNBS, BNN and Bloomberg would have you believe. In this context, the question of whether price resumes its recovery and rally this week is clearly not very important. The turnaround and resumption of the bull market in gold (and silver) is by no means a matter of IF, it is now a simple matter of WHEN.