April 7, 2023 | He Who Has The Gold Makes The Rules

By Peter Hambro
Reaction, London
Thursday, April 6, 2023

Straws in the wind presage the oncoming storm and not everyone notices in time. One such straw has just appeared in the gold market and only the most beady-eyed of your readers will have noticed that JP Morgan Chase did not, as is usual, roll-over its maturing derivatives position in gold. Instead, it delivered physical gold to those standing for delivery.

Gold expert Ted Butler on SilverSeek.com, writes: “A major development last week was the large amount of gold issued by JPMorgan over the first two days of the Comex April contract. Total gold deliveries by JPMorgan of 14,326 contracts, including 10,682 contracts (1.07 million ounces) by JPM from its proprietary house account were the largest by JPM in history.

This is big news because it demonstrates clear and blatant price manipulation by JPMorgan. With more than 19,000 contracts of gold standing for delivery, what would have been the price of gold had JPM not delivered more than 10,000 contracts from its house account?”

Given that the short positions were established at prices much lower than today’s, there must be substantial actual and mark-to-market losses involved.

“Wall Street on Parade” notes that “JPMorganChase Bank holds 53% of all the monetary metals derivatives contracts in the U.S. banking system.”

Could it be that the margin calls on its massive position – or those of its customer, whomever that may be – are now so large that it could no longer continue to meet them? If so, we are witnessing a substantial increase in the price of gold, as a reaction to the people’s need for a real investment when there is an absence of sellers.

I have been a long-time believer in gold as a safe haven, a store of value and medium of exchange. This belief was at times hard to defend, when the price failed to move in the direction that I thought it would.

The mirth of both friends and enemies was quite reasonable, because the price did not seem to react against the background of world instability and the madness of global currency debasement. Indeed, it became harder and harder for me to justify my position as a gold-bug and there were times when the laughter became difficult to bear. However, born a Capricorn I am hard to shift, and my only solace was a concomitant belief that there was an external agent that appeared to seek an unnatural stability in the market turbulence.

At first; I thought that Christine Lagarde, in one of her many guises, might be the conductor of this glum requiem. After all, I was in the audience years ago at a symposium in Moscow when she announced in English that when France became Chairman of the G8, currency movements would be agreed between the members and commodity prices would be controlled by law.

Unsurprisingly, this never happened, but the activities of JP Morgan Chase in the futures market subsequently became an outlier, as far as derivative concentration was concerned. Could this be the work of one or several Central Bank Financial Stability Units, working on the Lagarde model? Of course, rules about banking stability itself would normally make such a gigantic derivative concentration impossible; unless of course, the bank’s customers were undoubted or backed by physical metal. I doubt the customer is the BIS, since it helpfully publishes details of its gold swaps. Could that be the U.S. Federal Reserve or its associate, the Plunge Protection Team? Fort Knox probably has a lot of gold in its vault so there is no real net short position in gold for the United States but when the world is in turmoil and the creditworthiness of everyone is in doubt, the “Golden Rule” comes into play.

“He who has the gold makes the rules”.

So, Uncle Sam might now be beginning to say that the market is, as is so often the case, correct and no more smoothing please.

The author has worked in the gold business for more than 40 years, both as a trader and investor. He co-founded and was chairman of Petropavlovsk plc until it was taken over by Russians and is now Chairman of, and a major shareholder in XAU Resources Inc, a precious metals exploration company with assets in Guyana and shares listed on the Toronto Ventures Exchange.

Ed Steer April 7th, 2023

Posted In: Ed Steer's Gold and Silver Digest

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