Hard to believe, but CNBC and the World’s chartologists missed a very important point: In the last three days JP Morgan’s house account has taken possession of 3 times more physical silver than it did in all of 2011 (626 contracts, or 3.1 million t oz.) bringing their 2012 total to 1,058. The last time the Morgue took delivery of this much silver was September, 2010 at around $20.55 (it’s almost like they knew QE2 was coming – more on that later).
On Tuesday, when silver shot up more than 4%, the CMEgroup initially issued blank trading reports, as in “!!!! NO DATA !!!!”, but eventually published this:
492 of the 513 contracts delivered (96%) came from the Bank of Nova Scotia (425!) and
the US Government JPM customers. So it wasn’t exactly so “widespread buying!” was it?
Now let’s jump over and see what happened in gold:
Of the 335 gold contracts delivered, JPM (customer & house combined) supplied 334. There was only one gold delivery that didn’t come from JPM, and that one contract went to, wait for it, JPM. So JPM was involved in 100% of the physical gold transactions on February 28, 2012. To recap, JPM delivered a bunch of gold and took a bunch of silver, BoNS delivered silver and took gold. That’s really all that happened, unless you believe paper-metal traders throwing confetti around impacts things (spoiler alert: nope).
So it all boils down to this multiple choice question:
A) JPM suddenly hates gold
B) BoNS suddenly needs/wants more gold
C) BoNS suddenly hates silver
D) JPM’s house account suddenly needs/wants more silver
Figuring out the correct answer is your job, but I will tell you that in the wake of the “Gold & Silver Crash!!!” hyped on TV, BoNS has nibbled at silver (6 contracts), and JPM customer(s) have taken back 47 gold contracts. Maybe the Bank of Nova Scotia is looking to buy oil from Iran, or maybe despite everything you’ve been told, QE3 is very much on the table. Either way, I highly recommend looking beyond the chart.
You can follow the action whenever the tools at the CMEgroup (who definitely picked the wrong week to stop sniffing glue) feel like updating their data:
The data delays, combined with missing and incomplete reports by the CMEgroup has gone from annoying (like all the Jamie Dimon knob-polishing going on at CNBC…JPMs a “fortress”? And how would Maria B know?) to downright disgraceful (which is what Jamie’s appointment to Treasury Secretary will be….just wait).
Update: JPM House took delivery of another 187 silver contracts Friday 3/2/2012, bringing them to 813 for March and 1245 YTD net. ….The big sellers were Jefferies (customer) and HSBC (house) who delivered 134(net) and 80 respectively. Note: You have to save the reports to your own computer if you want them for future reference.
Other notes: Remember, a gold contract is 100 t oz., silver is 5000 toz (fifty times as much stuff). 6.2 million (the amount of t oz. silver JPM has taken so far in Q1) might not sound like a lot, but US production is only about 10 million t oz. per quarter.
Fun Facts: As mentioned in the article, JPMs house account has not taken delivery of this much physical silver since September of 2010, when they took 1,630 contracts. The last time the London Bullion Market Association (LBMA) silver fix was below $20 was September 13, 2010. http://www.lbma.org.uk/pages/?page_id=54&title=silver_fixings&show=2010&type=daily
Funner Facts: On November 23, 2011 JPM agreed to buy an additional 4.7% stake in the London Metals Exchange (LME) from the bankrupt MF Global for $38.9 million (read “dirt cheap”). The purchase made JPM the largest shareholder of the metals exchange (which trades aluminium, copper, tin, nickel, zinc, lead, aluminium alloy and NASAAC, steel billet, cobalt and molybdenum), with a 10.9% stake. http://dealbook.nytimes.com/2011/11/23/jpmorgan-said-to-buy-mf-global-stake-in-london-metal-exchange/ JPM is also the custodian for the iShares Silver Trust (SLV), which is the World’s largest silver stockpile, currently with 313 million t oz.