JPM Eligible Gold Plummets By 66% In One Day To Just Over 1 Tonne

I’ve been blogging about the JPM COMEX vault for a while now as it’s at the epicentre of the Gold fraud. Last night it was reported in the Hedge that they have 1 tonne of eligible gold left in the vault, leaving a lot of empty space and millions of paper contracts backed by nothing. It’s feet up and popcorn time I thinks, could this be the beginning of the end for physical delivery on contracts or will there be more fraud a twist in the tale. I believe they will go the same way as ABM AMRON and Rabobank. They will settle contracts in cash but if the fund is meant to be backed by gold and there is no gold, then the fund has no intrinsic value and the market value of said fund will drop to zero. End game scenario anyone?

For over a month, JPMorgan managed to mysteriously avoid matching up the gold held in its (world’s largest) vault with the Comex delivery notice update. However, as of today, that particular can will be kicked no more. Starting yesterday, JPM reported that just under 12,000 ounces of Eligible gold (the same Registered gold that two days earlier saw its warrants detached and convert to eligible) were withdrawn from its warehouse 100 feet below CMP 1. But it was today’s move that was the kicker, as a whopping 90,311 ounces of eligible gold were withdrawn, accounting for a massive 66% of the firm’s entire inventory of non-Registered gold, and leaving a token 46K ounces, or a little over 1 tonne in JPM’s possession.

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Needless to say, today’s massive move which increasingly puts JPM’s gold holdings in the danger zone vis-a-vis future delivery notices which just refuse to stop, has pushed total JPM vault gold to a new all time low of just 436k ounces, or a little under 14k tonnes with just 12 tonnes, or 390k ounces, of Registered gold left and rapidly draining. And to think that two years ago around this time JPM had over 3 million ounces of gold in its possession.

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Finally, those who believe there is a connection between the ongoing run on JPM’s vault gold, the suppressed price of the metal, the redemption of Bundesbank gold, and the fact that 3M GOFO has now been negative for 10 straight days or the longest period in history it has been below zero, and indicating an unprecedented gold collateral shortage, you are correct.

Finally, putting it all in context, this is what 1 ton of gold looks like in the real world courtesy of Demonocracy:

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Yesterday’s Gold Forward Offered Rate…it’s Hindenburg moment?

Yesterday there was a historic inversion in the Gold Forward Offered Rate, where the 1 and 3 Month GOFO rate slide into negative territory for the first time since 2008 and 1999 respectively. Using the latest LBMA rate update today, the gold backwardation is accelerating and the 6 Month GOFO has also joined hit negative territory.

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What could be causing this:

  • An ETF-induced repricing of paper and physical gold
  • Ongoing deliverable concerns and/or shortages involving one (JPM) or more Comex gold members.
  • Liquidations in the paper gold market
  • A shortage of physical gold for a non-bullion bank market participant
  • A major fund unwinding a futures pair trade involving at least one gold leasing leg
  • An ongoing bullion bank failure with or without an associated allocated gold bank “run”
  • All of the above

What is apparent is that something very abnormal is a foot and repeated only a few times in the last 20 years. With reports of mass fraud within the gold bullion market common and well documented, issues concerning the gold fractional reserve lending market maybe coming to surface.

Today, the golden backwardation story goes is documented in the FT:

The lack of liquidity in the leasing market has pushed gold forward rates, known as “gofo”, into negative territory, meaning that gold for future delivery is trading at a discount to physical market prices – a rare situation that has occurred only a few times in the past 20 years. The last time forwards were negative was in November 2008, when a scramble for physical gold spurred a sharp price rally.

Traders said that investors were alert for the possibility that the current tightness could trigger a squeeze among hedge funds with short positions in gold, potentially driving prices higher. “It has piqued people’s interest”, said one senior precious metals banker. Gold was trading at $1,248.50 a troy ounce on Tuesday, up 5.8 per cent from a three-year low at the end last month.
Bottom line, whatever is causing the dramatic collapse in liquidity and/or collateral, it is certainly not letting up.

Are the disconnects between physical and paper markets beginning to bare themselves to the public or are these just systemic problems in our financial markets playing out again and again and again?

There has been 120,000 ounces of gold withdrawn from the Comex yesterday, and another almost 100,000 taken off today, pushing the total down to 7.2 million oz. At this rate, the Comex gets into real trouble by the end of the summer. At the Shanghai Futures Exchange, it looks as if nearly 50% of their silver stocks have been removed since the big take-down in the price of silver in April.

History always provides us with the answer with time rhyming along the ages. The majority will refuse to learn from the past, looking only to always live in the now, ignoring lessons learnt with a belief that things will be different this time around.