The US and more specifically the US economy is going through incredibly difficult times right now. With the country-wide shutdown induced by COVID-19 entering its second month, all markets have taken a big hit.
Silver and gold prices are no exception. There have been steep declines in the last week but in the end, gold finds itself rising, while silver pulled-off an incredible recovery. How can this be--considering everything going on, what’s stabilizing this market?
Might it be the master market manipulator behind the whole thing, JP Morgan?
Since acquiring Bear Stearns in 2008, JP Morgan (JPM) has taken an active role in controlling and manipulating the gold and silver market. They have at once been the big COMEX short while also stocking piling the biggest physical silver and gold reserves in the entire world. They have been so effective in playing this game that most experts believe JPM has not taken a single loss trading COMEX gold and silver futures in over a decade.
While short selling these COMEX futures, they were able to amass huge stockpiles of gold and silver at bargain-bin prices. They now hold an estimated 25 million ounces of gold and around 1 billion ounces of silver.
The impressive part of all this is, they did it all while under investigation by the Commodity Futures Trading Commission (CFTC) and the US Department of Justice.
While this may seem unbelievable – and it is – it’s all true. This is all common knowledge among those involved in precious metals.
What’s also true is that JP Morgan has used this burgeoning financial crisis to begin pulling off the last act of their manipulation, making a killing from it. They did this by getting rid of their COMEX short positions in both gold and silver in recent days. They are now net long in both silver and gold. And, even with the physical shortage of silver and gold, JPM looks like they will continue to go even further into their net long position in the coming days and weeks.
While the physical movement of silver was fairly slow last week, the movement of gold had quite a moment, and JPM set itself up to be the one to prosper should a dramatic price hike be in the cards soon. There was record movement of physical gold going onto April as the COMEX warehouse added around 2.5 Million oz of physical gold. This would indicate that the COMEX warehouses needed new gold to cover the demand for physical gold as the need to have gold grows.
While many believed this type of surge came would result in COMEX delivery defaults and failures, none of that happened. While the system typically works that way, what it didn’t do was immediately skyrocket the price of gold in the face of that kind of demand.
While this was happening, what did JPM do? They issued around 7,400 (100 oz) deliveries to customers. By giving up this 740,000 oz of physical gold, JPM automatically closed out their entire short position in one week, managing to maintain around 25 Million ounces or more to spare.
This came as commercial banks across the board seemingly reduced their short positions in the gold market. However, when you look at the reported numbers on what commercial banks did to accomplish this, it looks like this reporting was entirely based on JPM’s manipulation. They might account for almost all of the reduced short positions of commercial banks and if so, they executed this master manipulation perfectly.
In the silver market, much the same thing happened but for different reasons. In the end, JPM was able to effectively close out their short positions in silver. This happened because large silver traders saw what was happening in the gold market and rushed to move around their silver positions before it happened in that market. The result was that JPM was able to double dip and take a long position in silver as well.
The problem with all this is, of course, is that it’s artificial price manipulation.
According to Economics 101 supply and demand laws, the sudden burst in demand for physical gold should cause prices to explode upwards. That’s not at all what’s happening though. What happened is that JPM created false market signals in the paper market. It paid off too and not a single regulator said a word.
Yes, JPM had to give up a (relatively small) chunk of their physical gold reserves to get this done but in the grand scheme of things, it was a small price to pay for changing its whole position in the market from short to long.
While the blatant market manipulation that JPM is engaging in is not good for anyone, the people who stand with the most to lose are the big commercial short positions. These investors may now be in an incredibly precarious spot despite registering small wins while JMP pushed prices around for their own gain.
Even after a massive price drop at the end of Q1, the short position now looks like a very tough place to be once JPM stops its positional maneuvers, allowing the price of gold and silver to rise to their natural, free-market levels.
These big commercial short positions now are holding more than $4.3 Billion all-in with combined open and unrealized losses in gold and silver futures on COMEX.
Now, JPM and the markets have lined up, and these losses may come to fruition soon.
Paper COMEX gold and silver futures have mostly all gone long so there is little interest in further selling.
Also, there is a huge shortage of physical gold and silver in the world right now, coupled with an enormous investment demand.
JPM seems to have entered the final stages of its grand plan and is ready to drop the hammer on those who got caught short at the end.
When the hammer does come – and it certainly will, probably soon – the losses of the big commercial shorts will only contribute to the gold and silver price exploding and JP Morgan will finally have their last laugh.