Is JP Morgan Shifting Its Silver And Gold Shorts To Non-US Domiciled, And Thus Unregulatable, Banks?

Tyler Durden's picture

Going through recent bullion bank shorting information, Adrian Douglas has stumbled across a nugget that may explain the sudden willingness of JPM to admit to the FT, via proxies as obviously the bank would never expose itself to even remote market manipulation claims, that it has collapsed its silver short. The reason: even as US bank silver (and gold) shorts by US banks have been gradually declining, those positions established by non-US bank, and thus entities not under the CFTC's control, have seen their silver shorts surge, increasing by orders of magnitude over the past several months. Is there a stealthy transfer of precious metals market manipulation taking place, one that exonerates the domestic, and therefore regulatable, suspects, while making foreign banks carry the burden of suppressing silver and gold prices? The reason: hand over the silver shorts to entities that would not be subject to the CFTC's upcoming size limit rules. Per Douglas: "The sudden and massive increase in their short positions in both
metals is conspicuous when compared with historical trading patterns.
The fact that it occurs at a time when the US banks that are mega-short
appear to be covering makes it doubly intriguing. It looks like a
strategy to shift suppression and manipulation of the market to banks
that are not under the direct supervision of the CFTC. Will these non-US
banks be expecting to receive an exemption to position limits where US
banks might not be successful?"
We hope to get an answer to all these questions soon - Douglas has sent out the following letter to the only honest man at the CFTC, Bart Chilton, which explains Douglas' findings, and demands an inquiry into just who these foreign banks are that are suddenly shorting silver and gold on the margin at alarming rates.

Letter To CFTC Commissioner Chilton On Trends In Bullion Bank Gold and Silver Short Positions

TO: Bart Chilton, Commissioner of the CFTC
From: Adrian Douglas, Director of GATA
Date: Dec 13, 2010

I would like to bring to your attention some very disturbing trends in the BPR before your meeting on December 16th regarding position limits.

In figure 1 below I have charted the silver short position of the US banks (blue line) and the non-US banks (green line and right hand scale) and all reporting banks, US + Non US (red line)

Figure 1

Looking at the trend of the US Bank silver short position it shows that it peaked at the end of 2009 and has been on a declining trend as shown by the blue arrow. At the same time the short position of non-US banks has been declining as shown by the dashed green arrow. But look what has happened since July 2010. There has been a massive increase in the short position of non-US banks. It has increased almost 1000% from 614 contracts in July to 6,329 contracts in December (delta + 5,715). This increase is so large it has more than offset the decline in the short position of the US banks over the same period which has reduced from 31,803 contracts to 26,332 contracts (delta -5,471 contracts). The combined US and Non-US bank short position is shown by the red line and this is now on an increasing trend as shown by the red arrow.

Which non-US bank(s) has increased its short position in silver so massively? What is that entity’s relationship to the US Bank mega-shorts, JPMorgan and HSBC? I know you can’t answer those questions publicly but these are questions the CFTC should be looking into. It looks suspiciously like the US Bank silver short position is being shifted to a bank or banks that are out of the jurisdiction of the CFTC. To further add to my suspicions the Financial Times has out-of-the-blue published an article that declares that JPMorgan is reducing its silver short position on the Comex.

http://www.ft.com/cms/s/0/7d699ca4-06ea-11e0-8c29-00144feabdc0.html#axzz1834JpsKS

That is impeccable timing don’t you think? And this newspaper has never once mentioned that JPMorgan Chase even holds a massive short position in silver but now confidently declares it is reducing it!

But the irrational exuberance of non-US Banks to suddenly massively short precious metals is not limited to the silver market. They have felt a similar compunction with respect to gold also.

Figure 2

Figure 2 shows the gold short position of the US banks (blue line) and the non-US banks (green line and right hand scale) and all reporting banks, US + Non US (red line). The blue arrow indicates that the US bank gold short position appears to have peaked in July 2010 and has declined from 161,378 contracts to 135,602 contracts (delta -25,776 contracts). However, we see that non-US banks after having been gradually reducing their short position from March 2009 suddenly in July 2010 aggressively increased their short position by more than 200% from 16,798 contracts to 53,120 contracts (delta +36,322). This more than offset by 40% the reduction in the short position of the US banks. As a consequence the short position of all reporting banks (US and Non-US) is now on an increasing trend as indicated by the red arrow.

Again I urge the CFTC to investigate which non-US bank(s) has increased its short position in gold so massively? What is that entity’s relationship to the US Bank mega-shorts, JPMorgan and HSBC?

A review of historical data indicates that non-US banks have not been major participants in the precious metals markets and have generally held fairly balanced positions between short and long holdings. The sudden and massive increase in their short positions in both metals is conspicuous when compared with historical trading patterns. The fact that it occurs at a time when the US banks that are mega-short appear to be covering makes it doubly intriguing. It looks like a strategy to shift suppression and manipulation of the market to banks that are not under the direct supervision of the CFTC. Will these non-US banks be expecting to receive an exemption to position limits where US banks might not be successful?

I consider that these trading patterns warrant investigation by the CFTC.

Best regards,

Adrian Douglas

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El Hosel's picture

  Anybody now why the Dollar got wacked at 8 eastern?  Futures are bumping the highs, maybe the Bernank got brand new bag?

 

  http://www.youtube.com/watch?v=dtqDB2spyG0&feature=fvsr

Jasper M's picture

'Cause no war; NK's leader declined to demonstrate his military genius to the capitalist, imperialist aggressors, and all their running dogs. 

bonddude's picture

He saw the "Team America" spot light shining against the clouds. ;-)

Fidel Sarcastro's picture

Was wondering the same thing myself and went long - several times - in the 6e (Euro futures).  Picked up a quick-G.  

Careless Whisper's picture

do these bankers ever do anything on the up-and-up? it's just a matter of time until they get the short squeeze of all short squeezes. now gaga fans are getting on board, and that is a few hundred million people under 25 years old world wide.

http://www.youtube.com/watch?v=eqtUoRM_M3Y

 

The Navigator's picture

Fool - silver braces?? - when the times comes, someone gonna rip your teeth out for the metal. Also, Good luck trying to get by TSA. That's no way to transport silver.

Guy Fawkes Mulder's picture

Thanks for sharing this. Hilarious.

I Am The Unknown Comic's picture

Thanks for that link El Hosel.  Man, I miss that kind of talent that James Brown had.  It's a Banksta's World!

detersbb's picture

What difference does it make when the physical runs out.  They cover their behinds until they can not deliver.  They protect themseves from the CFTC "cough-cough," and they protect themselves from the lawsuits including the RICOs, but it is only going to be until the longs demand delivery from the shorts and they can not deliver then the game is up.

Captain Benny's picture

I'd like to see a lottery winner invest $100,000,000 into silver.  That'd definately put JPM into a bind overnight.

SilverIsKing's picture

After I win the Megamillions tomorrow night, I promise to invest a sizable portion of my winnings into physical silver.  I might only net $50,000,000 or so but that should help.

TheGreatPonzi's picture

That's exactly what I forecasted on a previous post concerning the end of the silver manipulation.

"Now, they will have to use shell companies to do the job".

tmosley's picture

Yup.  You can bet mass defaults will proceed the minute JPM and HSBC have offloaded the last of their shorts.

Won't be long now.

JLee2027's picture

I wish, but I'm not convinced about that. I hope you're right though.

RockyRacoon's picture

Try to get a good 8 hours of sleep in the interim.

JimmyTheHand's picture

I do distinctly remember you making that call TGP. I completely agree, let the defaults roll.

living on the edge's picture

JPM has been replaced by the Fed itself as the main gold and silver short. TPTB were not pleased with the recent run up and JPM has been benched.

woolly mammoth's picture

When I read the piece I thought, bag-holders. Proxies designed to fail. Thinking Real Estate tricks. It just seems the Fed has enough problems without adding silver shorts. But, your probably right.

dlmaniac's picture

Maybe they are setting up phantom Caribean banks to be bag holders so when TSHTF it's the phantom guys hold the hot potatos. I don't know. That sounds too easy to get off.

Arius's picture

sounds like a plan...its supposed to be easy; these guys dont care what u and i think about it as long as it is legal; and if it is not lets change the laws and make it legal. Voila!

Segestan's picture

The mining industry needs to take a page out of OPECs book and sell through a network... cut the parasites out.

breezer1's picture

restricting sales would work except that most funds and who knows how many stocks are shorted and naked shorted. there is so much fiat at the disposal of tptb that the perception is easy to feed to those that don't know whats going on other than whats on the front page of the msm.

 there is a day coming when only physical will matter. the spot price will be as meaningless as the politicians and their criminal banker bosses.

merry Christmas to all.

Segestan's picture

I don't know, FOFOA and Bix Weir say like you. But without a collective association working to Free Gold it's all in the favor of the crooks.

Merry Christmas

Slash's picture

fair, efficient, balanced markets at work......nothing to see!

 

Big Mother is watching.

f16hoser's picture

Final act of a dying FIAT currency economy. Hold the line.....

unwashedmass's picture

does this matter now? let them short themselves silly....i, for one, will gratefully accept any opportunity to purchase silver lower....hell, dream of my life would be they take it to 25 and the 100k i just pulled out of the market would go into hard silver bullion in a heartbeat....which i would take delivery of and sock away in the old safety deposit.

At this point, i think we should all stop whining about what these guys are doing -- they are suiciding out, kamakaizing....

let them do it, and let them throw out cheap silver bullion all the way into the heart of implosion......

Captain Benny's picture

I'll be quadrupling my personal silver investments over the coming two months if silver holds steady.  I'll be doubling my gold holdings as well.  I'm not in it for returns,  I'm in it for capital preservation and a lingering hope that JPM will be forced to fail one day.

living on the edge's picture

Look for a desperate act such as a massive take down to shake out gold and silver. This could be our final chance to buy at lower prices. I have been hoping/expecting this.

JLee2027's picture

Only in your dreams will that happen. It would collapse the physical market in a week and the crooks would be heading up river real quick.

living on the edge's picture

Perhaps you are right and it is a dream, but perhaps these idiots are more desperate than we can imagine and are willing to try anything to forestall the inevitable.

VegasBD's picture

Same here. Would really like one more opportunity to grab some physical silver below $20/oz before it blows up

bankrupt JPM buy silver's picture

Below $20??? hahahah, good luck.  We see $100 before we see $20 again.

DoChenRollingBearing's picture

The Bearing, not having a brain in the middle, just a hole, just mindlessly buys PMs as income rolls in in.  Just bought some gold and silver today.  Been buying silver for years, gold for decades.

RockyRacoon's picture

Doug Cass sees a $250 drop in gold within the next few weeks or first month of 2012.

That's my contrary indicator.  He could be right, of course.  If so, I'll relish the idea of picking up some more at a reduced rate.  I'm selling off all the silver generic rounds and art bars to build up some cash for possible buy-in at a nice price.  I've got about 120 rounds/bars so I can either buy some cheaper gold, or, worst case I'll have cash to stash.

Sudden Debt's picture

JP's problem isn't just demand that's picking up but also the inflation that doesn't really exist according to Bernanke:

  • Unleaded gas up 24%
  • Heating Oil up 28%
  • Corn up 50%
  • Wheat up 48%
  • Coffee up 56%
  • Sugar up 27%
  • Soybeans up 30%
  • Beef up 26%
  • Pork up 22%
  • Cotton up 101%
  • Copper up 33%
  • Silver up 72%
JLee2027's picture

If the paper pushers drop the price to $19, only the stupid would sell physical for that. Look at 2008...paper silver went to $9, physical demand went through the roof and jumped over $20. 

Bottom line, it's a bull market, if your waiting for a better price under $20, good luck because you'll need it. A lot of it. Really a lot. Like winning the lottery odds.

LowProfile's picture

Low 20's isn't out of the question.  Gold has done 9-12% corrections over the past couple years, no reason silver can't double those swings.

If you can't handle the volatility, you may want to hedge...

JLee2027's picture

This isn't yesteryear. The system is coming apart and demand for precious metals has zoomed.

It's not going in the low 20's ever again. I'd bet my life on it.

barkster's picture

I remember that. I bought silver eagles when silver was at $9.50. There was so much demand for physical that premiums skyrocketed to $5.50 each so I had to pay 15 usd per eagle. Nothing but a paper manipulation...

fiftybagger's picture

Yes, I remember that very well.  Cheapest I got the morning it touched 8.50 was buffalos for 12.50.  Picked up a bunch of maples at 14 and my 2009 koalas cost me 14.30.

 

Buying Silver http://www.youtube.com/watch?v=fWEBhrUPzFk

Sudden Debt's picture

JP's enemy isn't only the demand for silver that's picking up, but also inflation that doesn't really exist according to Bernanke:

 

  • Unleaded gas up 24%
  • Heating Oil up 28%
  • Corn up 50%
  • Wheat up 48%
  • Coffee up 56%
  • Sugar up 27%
  • Soybeans up 30%
  • Beef up 26%
  • Pork up 22%
  • Cotton up 101%
  • Copper up 33%
  • Silver up 72%
Widowmaker's picture

It's not inflation if you don't look.

Only terrorists will look for truth.

Ace Ventura's picture

Bingo. By the way, isn't the whole 'net neutrality' thing being sorted out today on capitol hill?

The peasants are sure getting all uppity with this mostly unrestricted free-flow of information. Time to redesignate them as 'terrorists' or 'anti-gubment radical insurgents', and start controlling just what sort of info the 'useless eaters' have access to.

 

Captain Benny's picture

I'm a believer that we'll see a dramatic physical shortage come March, 2011.  I think we'll also see a great buying opportunity before that as the Fed lets the air out of the equities markets  (finally!).  The US equities are disgustingly overbought and all indicators say its purely digital hot potatoe as we're all aware.  When the stock bubble pops is when I'll commit my remaining ammunition.  It'll happen long before March.

living on the edge's picture

Ditto on the March 2011 time frame. I expect a dip between now and then.

DaveyJones's picture

the u.s. equities are disgustingly overbought...just like the u.s. politicians

Careless Whisper's picture

coal and oil have very bullish charts. weak dolla. inflation soon.