There's a lot going on and I'm diligently trying to connect all of the dots.
In fact, there are so many dots to connect, I
don't know where to start. I guess we'll start with price. Surprise,
surprise! The Bernank tipped his hand yesterday regarding QE∞ and really
moved the markets. Stocks, bonds, the metals...nearly everything has
rallied. The only victim was The Pig, which immediately fell over 2
points, which is an historic, monstrously large move. I don't ever
recall seeing a POSX move of that size before. Amazing!
The metals have rallied but the shorts remain in
firm control, at least for now. We got a bit of a panic squeeze in the
afterhours late yesterday but, once London opened, things we're jammed
back down. (Why anyone in their right mind buys gold futures between
midnight and 2:00 am NY time is beyond me.) The charts look better and
it's always nice to see some green on the screen but don't go getting
carried away just yet. Momentarily clearing $1300 and $20 is nice but we
really need at least $1350 and $21 before we can begin to get excited.
Until then, just keep stacking your physical, a little bit at a time.
For example, I ordered 50 ASEs late Tuesday. Glad I did!
OK, let's dig into the weeds a little bit and
see what we find. LOTS of talk about the negative GOFO rates out
there...which continue negative for the 4th consecutive day...which is
unprecedented. What the heck does this indicate? My friend, DenverDave,
does as good a job as I've seen explaining the implications. If you
haven't yet, please take the time to read this:
http://truthingold.blogspot.com/2013/07/gofo-explained-and-why-its-now-very.html
So, what other indications of shortage and backwardation are out there? Well, we've got this from Harvey:
"Tonight, the Comex registered or
dealer inventory of gold falls below 1 million oz to 985,969 oz or 30.66
tonnes. This is getting dangerously low. The total of all gold at
the comex (dealer and customer) falls again and registers a reading of
7.095 million oz or 220.680 tonnes of gold. JPMorgan's customer
inventory remains constant at 136,380.609 oz or 4.24 tonnes. It's
dealer inventory also remains constant at 401,877.493 oz but it still
must settle upon contracts issued in the June delivery month which far
exceeds its inventory. The total of the 3 major gold bullion dealers(
Scotia , HSBC and JPMorgan) in its Comex gold dealer account registers
only 26.03 tonnes of gold. The total of all of the dealers falls to
30.66 tonnes!! And tonight, Brinks dealer inventory falls to a record
low of only 4.18 tonnes of gold!!"
Let's see...The Banks only show 30.66 metric
tonnes of registered (approved and ready to be delivered) gold. This may
sound like a lot but it's not. Check these two charts below:
So, inventories are extremely low and falling.
The Bullion Banks (at least the U.S.-based ones) are now demonstrably
long Comex gold futures. And now we have negative GOFO rates which seem
to indicate a true tightness and lack of desire to part with physical
gold, even in the face of an easy short-term profit. What the devil is
going on here? Are we finally seeing the entire fractional reserve
bullion banking scheme come apart at the seams?? It certainly appears
that way.
And now to the title of this post. It appears,
on the surface at least, that JPM is aggressively hoarding physical
silver. Uncle Ted and Andrew have been all over this for some time now.
Let's review. First Andrew.
Again, even if you're not an active trader,
being a member of "Turd's Army" is well worth the money. Besides an
ongoing daily commentary with instant notification of any trades he
makes, Andy writes up a weekly commentary which he publishes every
Sunday.
This is, hands down, the most important and valuable newsletter you will ever receive. If you'd like to sign up, click here:
http://www.coghlancapital.com/daytrades-application?ak=turd_army.
Anyway, Andy has been noting to subscribers that, for about the past
three weeks, there has been a large, institutional buyer appearing at
each and every London silver fix. Because of the size of the orders,
this buyer could only be a Bullion Bank and he has deduced that is
likely JPM. So, if Andy is correct (and I have absolutely no reason to
doubt him), then suddenly JPM has taken to quietly acquiring as much
physical silver as they can.
Now, add to that what has been going on this
month at The Comex. Uncle Ted (another simply outstanding newsletter you
should take:
http://www.butlerresearch.com) has been all over this since the first of the month. Back on Saturday he wrote this:
"I believe the statistics from the
first six days of the July COMEX silver futures contract provide enough
data for attention. The standout feature for the first week of
deliveries against the July silver contract indicates that JPMorgan has
taken roughly 90% of the metal offered for delivery, or a total of 1637
contracts out of a cumulative total of 1828 delivered so far. In turn,
of the silver contracts stopped or accepted by JPMorgan, 90% (1479
contracts) were for JPMorgan’s own house or proprietary trading account.
In other words, JPMorgan took delivery of roughly 7.4 million ounces of
silver in the COMEX warehouses for their own benefit and risk".
He followed that up yesterday with this:
"A quick note on JPMorgan’s unusual
taking of delivery of silver in the current July contract I first
mentioned on Saturday. In the two delivery days since that review,
JPMorgan has taken (stopped) an additional 369 contracts, 350 of which
were for the bank’s house or proprietary trading account. Of the 2220
total contracts delivered so far in the July COMEX contract, JPM has
taken 2006 contracts, including 1829 contracts for the bank’s own house
account. Over the past two days, customers of JPMorgan have delivered
close to 200 silver contracts as well, raising the question if JPMorgan
is double dealing. Another point is that the 1829 contracts (9.145
million oz) that JPM has taken in its own name is above the level of
1500 contracts that COMEX rules dictate can’t be exceeded in any one
delivery month by any single trader. Hey – have you ever heard of a
rule or regulation that JPMorgan couldn’t evade? Me, neither."
There are still about 1,200 July contracts that
remain to be settled so we'll see where those go...but what the heck is
going on here? Of the 2,220 July13 contracts that have been settled so
far this month, JPM has claimed over 90% of them. Further, 90% of those
have gone directly into JPM's own house account!
So we've got JPM soaking up as much Comex silver
as they can without disturbing the price downtrend AND we've also got
JPM appearing each day at The Fix, buying up as much silver as possible
there, too. Connecting these dots leads me to this conclusion:
JPM is getting out of the silver manipulation
game. Perhaps they've been warned by the CFTC. Perhaps they simply see
the writing on the wall. Again, it's impossible to say. What we do know
is:
- During this 9-month decline, they've trimmed their naked Comex
short position from roughly 35,000 contracts down to approximately
15,000 contracts.
- The startling, surprising and historic rise in the "other
commercial" gross long position from 40,000 to over 60,000 contracts has
likely prohibited them from reducing their naked short position to
zero.
So, JPM sees the writing on the wall and is left with three choices:
- Cover the rest into rising prices. They tried that in 2011 and it didn't work so well.
- Go the "potato" route and simply default on delivery. http://www.tfmetalsreport.com/blog/4348/simplot-scenario-silver
- Continue to cover the naked shorts as much and for as long as you
can BUT also acquire as much physical silver as possible so that you actually can physically deliver
against all your short paper if it comes down to it. If you're short
10,000 contracts and suddenly those 10,000 longs stand for delivery, it
would greatly benefit you to actually have the 50,000,000 ounces on
hand. Settle it out and it's over.
Again, this is just a hunch...an attempt to
connect some dots. Let's watch this situation closely as we head through
the month and see if it continues to play out.
Lastly, I had a 30-minute conversation with
Felix Moreno of GoldMoney back on Tuesday. They've now released it as a
podcast and I think it turned out pretty well. It's worth a listen, even
if I do say so myself.
That's all for now. I hope you have/had a great day!
TF
