JPM and Goldman building big positions in physical gold and silver

(December 8, 2017 - by Lawrie Williams)

Precious metals specialist, Ted Butler, is nothing but forthright about his views on the big investment banks, notably JP Morgan as top of his list of the ‘baddest dudes’ in the sector.  To this he has added the financial sector’s other frequently recognized ‘bad dude’ – Goldman Sachs – accusing them both of playing the markets in such volumes that they totally dominate them and frequently calling them out in what he describes as ‘criminal’ manipulation’ of these markets.  Obviously, the regulators disagree, or just turn a blind eye. And, in any case as we have pointed out before if any of the mega investment banks are called out on their activities and subsequently fined for, at the very least bending the rules, the size of the fines, even though they may be millions of dollars, are tiny compared with the money made and probably just considered a normal cost of doing business.  It would probably take senior executive jail time to have any impact and, with the establishment (the swamp) protecting its own that would seem unlikely.

Ted’s latest accusation is that he now has conclusive proof that those two entities, which he sees as the ‘baddest dudes in the hood’ are taking 80% of all COMEX silver and gold deliveries for the first time in nine months in the case of one and much longer than that in the case of the other.  That has made him really sit up and take notice.

In Ted’s view there is only one basic reason for why anyone would buy and take delivery of anything.  As he says that is ‘that they think it will go up in value. No one buys and takes delivery (paying full cash value) for an asset expected to decline. That Goldman Sachs is now taking delivery of COMEX gold and silver, second only to JPMorgan, should send strong signals to anyone interested in these metals as an affirmation to do likewise.’

Ted goes on to note, as anyone who follows his extensive research will know, that JP Morgan has held the largest paper short position in the silver market for over ten years even though it also holds probably the world’s largest accumulation of silver bullion having been building this up for the past six and a half years..  In Ted’s view ‘the bank is taking advantage of the low prices its paper short position helped create to buy up physical silver at a bargain price. Until it started covering in this week’s COT report, JPM held its largest paper short position in years, only to turn around and add another 10 million physical ounces to its hoard this week.’

The recent gold price declines (and similar in the other precious metals)  bear all the hallmarks of being engineered through futures markets notional transactions and Ed Steer comments in his today’s newsletter that JP Morgan and Goldman Sachs again appear to have been the main buyers of physical metal on the dip for their own in-house and proprietary trading accounts.  As Ed puts it in his newsletter: ‘It’s been a really weird delivery month so far.  There have been 5,995 gold contracts issued and stopped, plus 5,147 silver contracts.  HSBC USA has been the big short/issuer in both metals -- and JPMorgan and Goldman Sachs have been gorging themselves’ –  at least in the gold accumulations.  In silver, the other big buyer has been Scotiabank which Ted Butler tars with much the same brush as JP Morgan in terms of silver market manipulation.

If Ted and Ed are correct then it looks like JP Morgan and Goldman Sachs could be positioning themselves for a big turnaround in the precious metals markets led, of course, by gold.  When gold rises the others in the precious metals complex tend to do so too.  But here again it is a question of timing.  Maybe the New Year could be looking good in this respect.  January tends to be a positive month for precious metals.  It will thus be interesting to see how Goldman’s commodities analysts – normally bearish on gold in particular – will rate precious metals prospects at the year-end and at the beginning of 2018.