Citigroup Just Cornered The "Precious Metals" Derivatives Market

Tyler Durden's picture

One week ago, when we scoured through the latest OCC quarterly derivative report (in which we find that the top FDIC insured 4 US banks continue to account for over 90%, or $185.5 trillion of all outstanding derivatives which as of March 31 amounted to $203 trillion; nothing new here), we found something fascinating: based on the OCC's derivative update, JPM had literally cornered the commodity derivatives complex, when from "just" $226 billion in total Commodity exposure, JPM's notional soared by 1,690% in one quarter to $4 trillion, or about 96% of total.


Some, without even bothering to read the article, did what they always do when reacting to Zero Hedge articles: accused it of writing a "wrong" post first and asking questions later and coming up with some utterly incorrect response to show just how wrong Zero Hedge was because, guess what, the Office of the US Currency Comptroller had clearly "fat fingered" trillions in critical data which is far more logical.

As usually happens in these situations, Zero Hedge was right (there was some tongue in cheek apology but hey, at least someone got to boost their traffic briefly by namedropping this web site; incidentally apology accepted), which could have been checked simply just by looking at bank call reports, in this case the quarterly Regulatory Capital report, schedule RC-R, which made it very clear that indeed JPM's OTC commodity derivatives had exploded to $4 trillion.

For those too lazy to check before tweeting, here is the number of OTC cleared "Other" commodity derivatives for JPM before, as of December 31:


And after, as of March 31:


Furthermore, while we await the OCC to respond to our inquiry (we aren't holding our breath), nobody has disputed our claim (because it is purely factual) that as of Q1 the OCC decided to exclude Gold as a separate commodity category (see call reports above) and lump it in with Foreign Exchange for some still unexplained reason. It would appear that gold is money after all...

So to summarize: as we reported first (and we would be delighted if other so called financial experts dedicated as much effort to digging through the primary data as they have to desperately try to disprove our article), JPM has indeed cornered the OTC commodity market, with its $4 trillion in "Other" commodity derivatives which amount to 96% of total. We don't expect anyone to ask Jamie Dimon about this on the quarterly earnings call because this is one of those things one doesn't want an answer to if one wishes to be invited to the next conference call.

However, another big question remains: just what is Citigroup - not, not JPMorgan - with the Precious Metals category.

Here is the chart showing Citigroup's Precious Metals (mostly silver now that gold is lumped in with FX), exposure over the past 4 years. Of note: the 1260% increase in Precious Metals derivative holdings in the past quarter, from just $3.9 billion to $53 billion!


For those of a skeptical bent the proof can be found in Citi's own call report, which can be seen here as of March 31, 2015 vs December 31, 2014.

Another way of showing what Citi just did with the "Precious Metals" derivative category, is the following chart which shows Citi's total PM derivative exposure as a percentage of total.


Soaring from just 17.4% to over 70%, there is just one word for what Citigroup has done to what the Precious Metals ex Gold (i.e., almost exclusively silver) derivatives market.


So, the question then is: just what is Citigroup doing with its soaring Precious Metals (excluding gold) exposure, and why is such a dramatic place taking place at precisely the time when not only JPM is cornering the entire "Other" Commodity derivatives market in the form of a whopping $4 trillion in derivatives notional, but in the quarter after none other than Citigroup itself was responsible for drafting the swaps push-out language in the Omnibus bill.

Screen Shot 2014-12-05 at 3.32.12 PM

And also: how is it legal that JPM is solely accountable for 96% of all commodity derivatives while Citigroup is singlehandedly responsible for over 70% of all "precious metals" derivatives? Surely even by the most lax standards this is illegal, but what makes the farce even greater is that all of this taking place out of FDIC-insured entities!

The final question, which we are absolutely certain will remain unanswered, is whether any of these dramatic surges have anything to do with the recent move in precious metals prices, or rather the complete lack thereof, even as Europe is on the verge of its first member officially exiting the Eurozone, and China's stock market is suffering its worst market crash since 2008. Oh, and we almost forgot: with both JPM and Citi now well over 50% of the derivatives market in two critical categories, who is the counterparty!?

We have inquired with the OCC about both the derivative moves of both JPM's "commodity" and Citi "precious metals" surges, both rising by over 1000% in the past quarter. We will promptly inform readers if we hear back, which we won't.

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ted41776's picture

in paper we trust

Took Red Pill's picture

Good work, Tylers! Evil banksters!

Billy the Poet's picture

"(there was some tongue in cheek apology but hey, at least someone got to boost their traffic briefly by namedropping this web site),"


When the Perth Mint blog sees the traffic spike, checks the referrer and follows the link back they'll see Tyler's middle finger.

But does this mean that Citigroup is now long precious metals excluding gold or are they short or is it something else entirely?

Spitzer's picture

Math is so Kyle Bass 2012.


tmosley's picture

I wonder if these banks are going to be the fall guys for the next phase of the crisis? Seems like they are betting hard on "status quo" even as the status quo is coming under ever more violent assault.

jefferson32's picture

True and great journalism, Zerohedge. Bravo.


Pinto Currency's picture



Yes Billy - Is Citi long or short is the question.

This position has been exploding while the paper price first rose to $18/oz but then declined so Citi may well be cornered but holding the market for a period for another reason.  Nobody knows.

SickDollar's picture

my honest guess is short


indygo55's picture

I think they are both long and short and I don't really KNOW shit. The thing is they have been surpressing the price of PMs for a long time and its my understanding they do that by selling naked SHORT futures contracts into an illiquid market. It would seem to me that someone needs to be on the other side of that trade to make it work so I figure they (JPM and CITI) hold both sides. The thing is these are all paper contracts. So where is the metal? Ive seen pictures of huge vaults of silver and gold but I have no clue as to the age and ownership of any of it. All I really know is an OZ in my hand is mine and mine alone. 

Philo Beddoe's picture

I don't really KNOW shit. 

Knowing that makes you more self aware than most of the world. Then again, I do not know shit either. 

TeamDepends's picture

Is this related to what Andrew Maguire is talking about on KWN, that open interest contracts in silver have spiked this year from 150 to 200K, and that swap dealers have transferred this massive naked short position onto "managed money or hot money funds"?

SoilMyselfRotten's picture

 in this case the quarterly Regulatory Capital report, schedule RC-R, which made it very clear that indeed JPM's OTC commodity derivatives had exploded to $4 trillion.


The future releasing of the schedule RC-R report is likely to fall under the category of National Security Secret

Doña K's picture

It's all fed money until the war breaks out. 

Oracle of Kypseli's picture

<<< Is Citi long or short is the question.>>>

I am thinking that both Citi and JPM are long and short, as they can influence the price at contract expiration in either direction in whichever is most profitable with very minimal risk. Rince and repeat with options expiration.

And they are arrogant enough to say "bite me"

So then collusion, "you get the silver and I get the gold" and act in unison. 

Just thinking....

Stuck on Zero's picture

What we're seeing is a classic Martingale bet against the house.  With leveraged money Citi and JPM can go to ridiculous extremes to beat the house in PMs.

Squid-puppets a-go-go's picture

what we're seeing is the Great Reset has been telegraphed

weburke's picture

thanks as always zh.


I suppose the old -if you cant beat them join them- applys.

zhandax's picture

"It would appear that gold is money after all.."

Tyler, before you crow too much, may I remind you that derivatives are to PMs as parking tickets are to a detached garage.

new game's picture

many smart posters admit they don't know shit. me too. and for these reasons i'll sit(shit) this one out. although we are talking about gold and silver phyzz, i still cant do due diligence. so, unless it is for prepping into uncertain tymes it is a very poor uninformed "investment" decision. and for those reasons i'm out. but, it is all very interesting as it signals the corruptness of our government sight seers(porn)...

also, when this gets ugly(and it will-has too), the deflationary(blood in the streets) cycle will kick in as the flight to cash will signal the bottom and that imfo is the tyme to come out both barrels loaded and finger a pullen(expect a 10 percent premium instead of 4-5%)...


philipat's picture

According to Ted Butler and other sources, JPM has accumulated massive physical silver holdings. If JPM is long and Citi net short, things might get interesting? As in maybe Citi is next on the Goldman/JPM list to take out after the Lehman caper was succesfully completed?

Doña K's picture

The Greek (Dimon) will not trust an Arab (prince Alwaleed) Unless they cross-own eachother evenly

philipat's picture

Yes it might be a "Thank you" for the Saudis move towards Russia and China and prior to agreement to accept payment for Chinese oil purchases in CNY. If so, I would expect that the (Misdirectional) 911 report will be "Leaked" shortly as a precursor......

Keyser's picture

Of course they are both long and short PM's... They are long physical and short paper... What this means is that price discovery is dead for PM's as long as these two bankster organizations can move the price anywhere they want via derivatives... 

Doña K's picture

This scenario makes even better sense. 

illyia's picture

Thus, they are, perhaps, each other's counterparties, in the circle-jerk fashion?

While being long physical? Or not... depending on the "mission" statement...

Keyser's picture

The agenda is the commodity class that has held it's perception of value over several millennia, physical PM's... That will be all that's left after all the fiat crap is flushed out of the system... 

lordkoos's picture

If JPM has really cornered the market in physical silver, it's interesting to compare this to the Hunt brothers attempt to corner it back in 1980.  The government busted the Hunts, but something tells me that's not going to happen to JPM.

Al Gophilia's picture

Having traded in that cesspool for a few years, I have an opinion that may help.

The banks have their own trading desks as do the Spec Funds. The banks have been setting up the specs to be the fall guys in the poker game. They have been setting them up for years and have been fleecing them for countless billions over that time. Now, it occurs to me, being one who was fleeced as well (considering the fundamentals as my foundation for a trading strategy), that to remain in the game after realizing consistent and considerable losses, one must be completely clueless, unfathomably rich or betting with other people's money so no skin off your nose. That they (specs) remain is a puzzling question than leaves me with only one conclusion; It is the GAME. They are stripping money from spec managed funds collusively.

The way I see the pits is one of wealth transfer in the paper markets. The Comex and regulators are enablers. They provide the platform and the cover for a scheme where large pools of investor's funds (under management) can be accessed and stripped without the  ever-trusting investor being aware of it, until the End of Year Oops-Sorry Performance Statement. "Oops! Sorry! Your returns for the year have been less than anticipated. We assure you that next year will be a banner year, so stick with us. 

So, in collusion, the banks set up a huge short position in the precious metals markets, transfer it to the specs who coat-tail the banks as the price falls, adding to the price fall through their selling. The banks unload all their previous short positions onto the specs, going long, thereby setting themselves up for a scalping of the spec funds on the reverse price manipulation; rinse and repeat. 

I've never seen anything proportionally quite like this and it looks as though a whole lot of money is going to be transfered to the banks out of people's savings accounts or margin accounts.

It's not as obvious as the MF Global theft of saver's money by JP Morgan, but it has the same MO and as you can see above, the same players are involved. Who needs the exposure of open theft, when it can be done legally or without having to buy judges and regulators?

philipat's picture

Yes, I have often wondered WHY the Specs comtinue to play in such a rigged casino after they have consistently been on the wrong side of the Commercials Wash-Rinse cycling. If it is so painfully obvious to casual participants such as myself (And I have made monet trading WITH the Commercials based on the net short Commercial position) should it not also be obvious to the Specs? Perhaps the Algos have entirely taken over?

Failing the imposition of position limits, the best that can be hoped for with a captive "Regulator" is that this manipulation by the Cartel (As Agents of The Fed/PPT/ESF/BIS Complex) becomes widely acknowledged such that Comex will just disappear from a lck of volume, accelerated by a move to the new physical-backed futures market in Shanghai. Perhaps then we can finally revert to an honest price discovery mechanism and the semblance of a "Market"?

Sincere thanks ZH for the excellent jounalism. Is it any wonder that CNBS has only about 5 remaining viewers and the Financial comedy press is dieing?

Al Gophilia's picture

The banks and specs "Big Churn". They both get paid. Who's on the other side of the trade? Savers and workers; both being stripped of their assets, right down to their sovereignty. 

Wither goest thou, Greece? (et al).

fiftybagger's picture

It's the same as the miners.  Why would Barrick hedge and lose a billion dollars in a rising gold market?  Why do miners continue to operate at a loss?  Because they've stacked the boards with their minions who they pay off in funny munny.  It all traces right back to the FED's printing press.  If you can print up unlimited cash, you can cover everyone's losses.  Bullion banks, Commercials, and specs are all working for the FEDs.

new game's picture

preying on cog dis...

wake the fuck up!

Jafo's picture

Does this make Kyle Bass a "spoiler" by taking physical posession of the gold and putting it in a repository in Texas?  It's going to be hard to rob him if he plays like that.

Not My Real Name's picture

A big thanks to commenters like Al, Phillipat and other ZH members too. I have gained significant knowledge over the years from the excellent dialog you contribute here.

Nexus789's picture

The financial system outside the delivery of a basic banking service is one gigantic skimming operation. They extract value for themselves and in doing so they destroy value elsewhere. They create no value - making money through the manipulation of money.  This has been analysed via political economy. A book, ‘The Enchanted World. Inflation, Credit and the Global Crises (1982)’ took the analysis beyond a focus on production and examined the role of money and financial commodities.

ilion's picture

Is there any way to figure out is Citi and JPM exposure on the short or long side?

TahoeBilly2012's picture

Logic dictates that if they are in big, yet market neutral that price swings would be muted as the "rest" of the players, especially anyone really trying to cause a sudden move, would be left powerlessly "diluted".

So what has happened with the price of metals as of late? That's right, not much, sideways oon high amount of open interest.


bbq on whitehouse lawn's picture

When has any to big to fail bank ever been market neutral? They sold 4 trillion worth of insurance.
" Those who are closest to the plillars,
suffer most when they fall. "

philipat's picture

Yes, the weekly COT Report and momthly BPR provide some insights. BUT, that is only on Comex  and does not include LBMA or other OTC derivatives.

SickDollar's picture

Very much love your work ZH


Arnold's picture

" The game's afoot Watson!"

Arnold's picture

Looking at the charts, they lowered their 1 year Gold exposure Q4 2014 by 2/3 to Q1 2015.

 Didn't change the longer term exposure "substantially" in the same report.

Not being real knowledgeable, aside from the legislative aspect, it looks to me that the short Dirs are going to be a write off, and the bet is that after a year, say Q2 2016 there will be a payout on the rest of their holdings.

the thought that the holdings will be made whole when things unzipper is a pipe dream on some group's part.

Interested to see what Q2 and Q3 2015 holdings will look like, if we're still able to use the current Status Quo medium (ie zh) to see them.

I_rikey_lice's picture

"But does this mean that Citigroup is now long precious metals excluding gold or are they short or is it something else entirely?"


Someone smart please answer the question.

macholatte's picture


If they own nearly all the derivitaves, does that mean that all the stuff being peddled by Erik Sprott & all the other ETF's were bought by Citi?  Using free money fabricated from air? And why would they do that?


disabledvet's picture

"Shooting Blamks" so to speak.

Sounds like they're buying up all the coinage using their "derivation of money."

Ironic a Bank "defaulting" (in the sense of a computer program not in the financial sense) to actual money (meaning coinage) if true.

You can buy the Blanks from a private company in if my theory is true this would as a derivative is a "contract" to buy up all the coinage from said enterprise.

The NOTIINAL amount would appear huge (TRILLIONS!!!) but the actual dollar amount...while not trivial...would be quite small for a Bank of this size.

Maybe a couple of hundred billion.

Not a bad bet if you think the price doesn't have much further to fall in Silver and obviously you are getting actual silver as per the contract.

Who knows...maybe the U.S. mint will actualy go back to a real copper penny...

disabledvet's picture

Million not billion.

There simply isn't that much to buy when it comes to precious metals...