JPM Eligible Gold Plunges To New Record Low, And Why It Could Have Been Much Worse

Tyler Durden's picture


Back on April 25, in the aftermath of the latest epic precious metals takedown, we reported that something odd had happened: overnight, total Eligible gold held in the vaults of JPM dropped by 65%, or 260.8k ounces in one day, to a record low of only 141.6K ounces. Contrast that with the 2 million Eligible ounces the JPM vault at the basement of 1 CMP held when it reopened.

Since that moment, many were curious if this may not be the start of the proverbial "run on the vault", and whether JPM's COMEX holdings could actually run out, and if so what happens then. And finally: is the dramatic plunge in gold related to any of this (and certainly to the Bundesbank's repatriation of NY Fed gold for the next five years)?  In the ensuing days, JPM's Eligible gold fluctuated in a tight range, until today, when another 22,780 oz were withdrawn from Blythe Masters' metals cellar, bringing JPM's eligible gold to a fresh record low of only 137,377 troy ounces.

But this is only half the story: the details are as always behind the scenes.

Because what the chart above does not show is how, quietly, JPM managed to keep its eligible inventory constant even in light of various withdrawal demands.

The chart below looks at the relative moves in JPM Eligible and Registered gold, starting with the massive withdrawal day, April 25. What is immediately obvious is that the only reason JPM's eligible gold hasn't plunged, is due to the periodic "adjustments" out of Registered into Eligible gold, which on essentially all days in the past three weeks netting out, and for every ounce converted into eligible, one ounce was removed from registered gold.This also explains why even with the three distinct sizable withdrawal days, of 24K, 57.9K, and 22.8K on May 2, May 8 and May 14.

Incidentally, when asked about the rationale behind such seemingly arbitrary reclassifications, and warrant cancellation of registered gold into eligible gold, a market surveillance analyst at the CME replied as follows:

...the adjustment column does reflect the issuance and cancellation of warrants, but it can be used for other purposes as well. Anything that is not received or withdrawn would be reported in the adjustment column.

In other words, JPM and the Comex have full liberty to adjust what is eligible and what is registered, at will, and can thus easily replenish inventory even when it is about to run out.

And run out, it almost would have.

Because if one ignores the 100k or so ounces of Registered gold that were reclassified to replenish eligible inventory, JPM's eligible gold would, as of right now, be down to a negligible 36,931 ounces, or just over 1 ton!

At that point JPM would be down to one withdrawal request away from declaring force majeure on its eligible gold holdings, and all the unpleasant consequences that this would entail for future delivery requests.

Source: COMEX

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Tue, 05/14/2013 - 20:46 | 3562885 CitizenLame
CitizenLame's picture

Gold? What Gold?

Tue, 05/14/2013 - 20:58 | 3562922 Dr.
Dr.'s picture

That stuff without the "backing concept"..


/sarc off.


Tue, 05/14/2013 - 21:06 | 3562949 Debtonation
Debtonation's picture

Is there such thing as negative physical?

Tue, 05/14/2013 - 21:08 | 3562955 toys for tits
toys for tits's picture

Yea ... gold painted tungsten.

Tue, 05/14/2013 - 21:13 | 3562974 francis_sawyer
francis_sawyer's picture

Let's get a raffle going around here to determine which of us gets to take the last ounce off the shelf...

Tue, 05/14/2013 - 21:26 | 3563009 Pinto Currency
Pinto Currency's picture


Registered gold is that which is available for delivery on Comex contracts.

Eligible gold is that, typically, held for clients but is not registered for delivery against Comex contracts.

Clients appear to pullng their gold. 


Tue, 05/14/2013 - 21:46 | 3563019 The Thunder Child
The Thunder Child's picture

The problem is nobody has an alternative method of measuring the true physical price. TPTB dictate the price because there is no other mechanism for price discovery so people just keep looking at the fraud comex price or the LBMA daily price rigging.

What we need is a new website or new non profit start up website that samples all the largest physical dealers for gold/silver prices on 1oz coins/bars 10oz bars, 100oz bars and good delivery 400oz bars. Once a day or once every 24 hours a physical spot price is delivered at a set time. Give it a decent name (i all ready have a few in mind) and get people to contribute from across the community for pricing. I understand that there are price sampling sites all ready but this would be an average of the 10 best prices for each deliverable PM item. The site would need to have complete transparency and it would show the location every single price entry was taken from.

It is not an overnight solution, it would take community effort but it is a solution none the less. Any Takers?

Tue, 05/14/2013 - 21:56 | 3563098 DoChenRollingBearing
DoChenRollingBearing's picture




       Press Release


The central bank of DoChenRollingBearing ("CB-DCRB") announces to the world that it has run out of FIAT$, and, for the time being, will not be making any further purchases of gold.

Naturally it would be self-serving of any responsible central banker to cheer for a higher price of gold who is not actually in the market to buy any.  So, the CB-DCRB will not issue its typical "Gold, bxxxxxx!" exclamation either, at least for now.  It would be self-serving, to watch the price march up while exerting no pressure to send said metal upwards in price.

And for the sake of delicacy to a gentle reader yesterday, the CB-DCRB will refrain from using the word "bxxxxxx".

Tue, 05/14/2013 - 22:27 | 3563240 Spitzer
Spitzer's picture

I phone the main branch of the bullion bank , Bank of Nova Scotia every day to ask about inventory. Since the selloff, they say they have nothing except 1 5 oz bar.I only buy from the main branch so I dont have to pay shipping to a smaller branch. So I went in to buy that 5 oz bar at a diffrent branch today and the lady said (minutes after I asked the main branch about inventory) that she had a 1 oz bar in stock. I said, are you sure ? She said yes.

I told her that the warehouse told me that they had nothing but a 5 oz bar. But she said that she had a 1 oz. So I just bought it. I have to pick it up tommorow. (if it exsists)  I wonder how that phone call to the warehouse is going to go tommorow.

Oh well. I have a contract in my hand that says they owe me an oz of gold tommorow. If they cant find one, I am going to raise some shit.

Tue, 05/14/2013 - 22:34 | 3563258 prains
prains's picture

make sure to take a video

Tue, 05/14/2013 - 23:58 | 3563542 JackT
JackT's picture

Price will drop tomorrow and they will hand you cash equivalent for your troubles. Damns

Wed, 05/15/2013 - 00:43 | 3563634 Spitzer
Spitzer's picture

I will.

The branch I bought from is like 10 minutes from the warehouse/main branch...

Wed, 05/15/2013 - 03:02 | 3563831 Deo vindice
Deo vindice's picture

If it's "like" 10 minutes, what would that be in real, measurable, historically-definable 60-second minutes then?

Just askin'.

Tue, 05/14/2013 - 23:18 | 3563410 Spider55
Spider55's picture

Don't forget to use toilet paper, maybe they can spray paint it gold color and sell it as a 10oz bar!

Tue, 05/14/2013 - 22:06 | 3563152 Room 101
Room 101's picture

Nucleo exchange already exists. 

Tue, 05/14/2013 - 22:08 | 3563164 The Thunder Child
The Thunder Child's picture

Looking to better that, and not sell or exchange on the site(whole new can of worms). Only daily price averages of the direct physical market.

Wed, 05/15/2013 - 08:20 | 3564152 Its_the_economy...
Its_the_economy_stupid's picture

Tue, 05/14/2013 - 22:54 | 3563323 Professorlocknload
Professorlocknload's picture

Doesn't look like gold to me. Looks more like statistics released by questionable financial institutions. Anyone audit JPM on this? Are they more credible than the Fed?


Tue, 05/14/2013 - 23:20 | 3563388 Spider55
Spider55's picture

Sounds like good old voodoo accounting -

Tue, 05/14/2013 - 21:30 | 3563017 espirit
espirit's picture

In my neck of the woods, they've already sold the shelves...

Tue, 05/14/2013 - 22:18 | 3563211 The Thunder Child
The Thunder Child's picture

Best walk in bullion dealer / LCS in the GTA (my turf) is fully stocked up.

Tue, 05/14/2013 - 21:30 | 3563018 Al Gorerhythm
Al Gorerhythm's picture

Oh yeah. 100:1 fractional reserve sales slips or 128 trillion of unfunded US liabilities (promises to pay) or 17 Trillion fed government debt or 60 trillion national governments debts Oh yeah, I do believe there is. Another example is ABN  Amro's admission of negative allocated gold in vault for delivery on demand. I do believe that's negative. But then, that's bullish, right?

Tue, 05/14/2013 - 22:08 | 3563160 Monedas
Monedas's picture

Bitcoin ?

Tue, 05/14/2013 - 23:04 | 3563358 FreedomGuy
FreedomGuy's picture

Or how about "notional gold"? That is gold that is on paper that you own but may or may not exist in real life.

I can see how they might actually reclassify instantly and as necessary. I suspect it involves simply taking allocated gold and making it available while creating some sort of paper debt to the owner of the allocated gold...based on placing a order to a real mine to obtain real gold...someday. It is based on "You can trust us." accounting methods.

I suspect these financial behemoths like JPM are beyond the reach of mere mortals with accepted accounting methods, laws and established procedures.

Wed, 05/15/2013 - 00:01 | 3563540 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

I still say there will be a moment where physical gold (which could be fake) will trade at a discount while gold certificates (which are a claim to gold gauranteed to be real) trade at a premium.


Only in the west of course.  Jon Stewart will do a rant about a guy who bought a stupid yellow brick from another paranoid nut when he could have bought a geniuine gold certificate backed by a trusted institution.


I just don't think people understand just how crazy its gonna get before reality finally smashes us in our collective face.

Wed, 05/15/2013 - 08:21 | 3564153 Chuck Walla
Chuck Walla's picture

Is there such thing as negative physical?

Its called tungsten.


Tue, 05/14/2013 - 21:21 | 3562994 Al Gorerhythm
Al Gorerhythm's picture

1 ton of gold: A cube measuring 14.16 inches. That's a big vault you have there for such a tiny block, Blythe.

Tue, 05/14/2013 - 22:48 | 3563303 Temporalist
Temporalist's picture

The better to cheat you with my pretty! -The Wicked Witch

Tue, 05/14/2013 - 21:56 | 3563118 DoChenRollingBearing
DoChenRollingBearing's picture

@ CitizenLame


The central bank of DoChenRollingBearing ("CB-DCRB") would like to reassure the public that it indeed does have all the gold in its vaults that it claims to.

Wed, 05/15/2013 - 00:03 | 3563557 Al Gorerhythm
Al Gorerhythm's picture

Would you care to let me audit that?

Tue, 05/14/2013 - 21:02 | 3562895 Wakanda
Wakanda's picture

"Just one ton of gold left

And what do you get?

Another day older and deeper in debt

Saint Peter don't ya call me 'cause I can't go!

I owe my soul to the company store"

Goin' out to Blythe Masters over at the Morgue

Tue, 05/14/2013 - 21:14 | 3562979 lickspitler
lickspitler's picture

I don't care if Paper Gold goes to zero.

In my eyes my stack won't be worthless.

Tue, 05/14/2013 - 20:52 | 3562902 EscapeKey
EscapeKey's picture

As long as there remains bankrupt Mediterranean nations, there's gold to be stolen.

Wed, 05/15/2013 - 00:53 | 3563656 PontifexMaximus
PontifexMaximus's picture

Because they have gold they are not bankrupt.

Tue, 05/14/2013 - 20:52 | 3562903 Bastiat
Bastiat's picture

It's nothing short of barbaric to bring attention to such things.

Tue, 05/14/2013 - 20:57 | 3562923 Theta_Burn
Theta_Burn's picture

Your right, fuck it, i'm getting rid of any gold/silver I have and buying a BMW...

Wed, 05/15/2013 - 11:54 | 3565065 SILVERGEDDON

That works only in Brazil as a hedge against the peso. Maybe if you get a Brazillian to deal with unwanted hair along with the car, you'll be stylin'.

Tue, 05/14/2013 - 22:03 | 3563145 Cdad
Cdad's picture

Over and over, issue after issue, it is JP Morgan at the heart of it all.  One day, people in this country will recognize that this particular TBTF bank needs to go.  And at that time, folks could readily withdraw all funds from the bank, and short the shares.

And a grateful nation would rejoice...

Tue, 05/14/2013 - 23:23 | 3563431 Spider55
Spider55's picture

Don't forget Goldman too!

Tue, 05/14/2013 - 20:53 | 3562909 texas goldfinger
texas goldfinger's picture

The whole point of this latest "discovery" is that the numbers are meaningless and there is really no useful information to be gleaned from them.  Nothing to see here, move along.

Tue, 05/14/2013 - 21:42 | 3563069 espirit
espirit's picture

You're missing the point.  This is a reorganization and restructure of Gold on loan.  Paybacks happening all around the globe.

Everybody owes.

Wed, 05/15/2013 - 11:28 | 3564915 texas goldfinger
texas goldfinger's picture

So I guess the $33 (and counting) drop today is the result of JPM having to go out into the market and buy some gold bars?  Wouldn't prices be going up, not down?  And please don't tell me that they are shaking gold bars out of GLD.  Those numbers are also a complete fiction (in case you never bothered to read the prospectus or understand the mechanics of how the market makers operate).

Tue, 05/14/2013 - 20:54 | 3562910 Thisson
Thisson's picture

For anyone that cares, here's a good description of the difference between Eligible comex metal and Registered comex metal:

The registered gold is what's available for delivery.  The eligible gold is relevant insofar as it can be converted to registered gold if the owner wants to make it available for delivery.


Tue, 05/14/2013 - 21:00 | 3562928 fonzannoon
fonzannoon's picture

Is there an unlimited amount of eligible gold?

Tue, 05/14/2013 - 21:10 | 3562962 toys for tits
toys for tits's picture

Of course ... if it's made out of little sheets of paper.

Tue, 05/14/2013 - 21:16 | 3562982 fonzannoon
fonzannoon's picture

I hear you toys. But that presents a problem at some point. ZH worded it in a way that made it seem like default never comes into the equation.

Wed, 05/15/2013 - 05:12 | 3563916 ParkAveFlasher
ParkAveFlasher's picture

If the umpire will not call strikes, nobody will strike out.

Wed, 05/15/2013 - 01:22 | 3563444 Spider55
Spider55's picture

So if you the combined the two that would give you the true valve of there physical gold on hand - right?



Tue, 05/14/2013 - 20:55 | 3562912 fonzannoon
fonzannoon's picture

"In other words, JPM and the Comex have full liberty to adjust what is eligible and what is registered, at will, and can thus easily replenish inventory even when it is about to run out."

So that's a wrap for the JPM vault story?

Tue, 05/14/2013 - 21:24 | 3563002 Bay of Pigs
Bay of Pigs's picture

Maybe Bart Chilton can look into this story after he's done with the silver investigation?

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