On Friday GoldCore posted an article asking
whether JP Morgan was cornering the silver bullion market, noting their Comex
warehouse stocks of 55 million ounces and claims by Ted Butler that they “may
be holding as much as 350 million ounces of physical silver.” My short
answer: I don’t think so.
The clear import from the article is that because the
warehouse has JP Morgan’s name out front that all the silver insider is
theirs. However, JP Morgan has large market share of global precious metal
market activity with a significant number of industry participants using JP Morgan
to buy and sell physical and futures, and for storage services. It is
therefore highly unlikely that none or little of the silver in JP Morgan’s
warehouse is held on a custodial basis for clients.
While it is not possible to know who owns the metal,
either from Comex eligible/registered warehouse reports or house/client
delivery reports (do you think banks would allow a reporting structure that
would make it so easy to work out their proprietary position?) as a data
point consider the following net amounts of silver taken delivery of since JP
Morgan opened its silver warehouse (data from Sharelynx):
- Customers of JPM have taken delivery of
a net 4781 contracts (23.9 million ounces)
- JPM’s house (proprietary position)
delivered a net 4683 contracts (23.4 million ounces)
Since a bank trading futures can receive or deliver
silver held in other banks’ warehouses, we can’t just assume that JP
Morgan owns 23.4 moz. Nevertheless, these figures at least show a significant
amount of customer activity by their clients.
It should also be considered that a profitable part of a
bank’s business is arbitrage and market making. For example, if silver
speculators go long futures, JP Morgan can make a market by going short
(there has to be a short for every long) and then hedge itself by buying
physical silver.
So the silver in JP Morgan’s warehouse could be owned by
its clients (individual and wholesale), other banks, or owned by itself but
hedging other short positions. Only after taking off these three would any
remaining silver be owned outright by JP Morgan.
As to the 350 million ounce figure, the only public
explanation of this figure is this December 2014 article.
which it should be noted is a work of reasoned speculation, but speculation
nonetheless.
Ted says that “I believe
much more than 100 million oz of silver, perhaps double or triple that amount
have been accumulated by JPMorgan using the SLV to transfer metal to its own
London warehouses completely undetected and unreported” (my emphasis).
Ted also claims that JP
Morgan has acquired “as many as 70 million oz of Silver Eagles, or half
the amount produced by the US Mint since April 2011.”
The main logic behind these claims is the
“counterintuitive” metal flows in SLV and US Mint Eagle sales, namely, “that
the public doesn’t normally buy investment assets on falling prices” and
Ted says that he thinks “the most plausible reason is the presence of a
big buyer in silver coins, whether those coins are Silver Eagles, Maple Leafs
or Philharmonics.” I tend to agree with Steve St. Angelo in this article that Ted
is not showing much faith in individual silver investors.
By Ted’s argument, any silver inflow/increase in mint
sales, ETFs, funds, warehouses/custodians stock over the past few years is at
odds with the falling silver price and the behaviour of gold ETFs (which have
declined) and therefore must be supported by buying by JP Morgan for its
secret long position. All I can say is that JP Morgan must be very busy
intervening in all of the major known (reported) stocks of silver below (as
maintained by Nick here). By this logic, 350 million
ounces looks like an understatement!
Gold Money (maybe James Turk can confirm if JP Morgan is
a big client of theirs)
Bullion Vault
Perth Mint Pool Allocated (I can confirm JP Morgan does
own any of this, all retail investors)
Bullion Management Group (Nick Barisheff needs to give JP
Morgan a call, looks like he has been left out)
Permanent Portfolio Fund
Now all the major ETFs, starting with iShares
ZKB
ETF Securities
Julius Baer ETF
Deutsche Bank ETF
I could go on, but I think you get the point: investor
interest in silver in the face of falling prices is a global phenomenon, not
a JP Morgan one.
