After decades of fleecing traders and investors in precious metals markets, the Bullion Banks themselves are now being forced to “stand and deliver”
A paradigm change may be taking place in precious metals markets. The result could be that gold and silver prices may start to move (relatively) freely for the first time in decades.
First some history.
It’s been an open secret for a long time: the Big Banks have been rigging precious metals markets. For years, sycophants like Jeffrey Christian of the CPM Group attempted to deny that such manipulation took place.
The great irony is that it was Christian himself who helped to shine a spotlight on the Big Bank’s gold market “operations”. In official testimony to the CFTC, Christian famously blurted out that for every ounce of real gold that was bought and sold in the bankers’ futures market, 100 ounces of “paper gold” (i.e. paper) was traded.
The primary gold market was a 99% paper market. The same is true with silver, but to an even more ridiculous extreme.
This alone was enough to make many observers suspicious about how the bullion banks “managed” the prices of gold (and silver) – by clubbing markets with massive short-selling of this paper gold and paper silver.
However, as these Big Banks have been caught committing an assortment of criminal acts to manipulate bullion prices, suspicion has given way to certainty.
Manipulating the gold fix
The gold “fix”: it even sounds crooked.
Twice a day, a shadowy group of bankers meet behind closed doors, whisper in each other’s ears for a few minutes, and then declare the “official” price for gold. This official price is used as the settlement price for an assortment of contracts related to the trading of gold.
It’s supposed to reflect the actual price at which gold is trading, in the futures market and/or spot market. But it frequently doesn’t.
Finally, these persistent discrepancies motivated regulators to look into this (literal) price fixing. Investigators turned over a few rocks and what did they discover? Bankers committing crimes.
The bankers were caught manipulating the gold fix early in 2014. Shortly after that (surprise! surprise!) investigators discovered dirty deeds occurring with respect to the silver fix as well. In this case, Deutsche Bank, HSBC and Bank of Nova Scotia were accused of this price-fixing conspiracy.
These bullion banks agreed to cosmetic changes in how they calculated their “fix”. And then the same group of banks were promptly caught rigging the silver fix again – to cheat options traders in the silver market.
Deutsche Bank, in particular, was scrutinized closely with respect to precious metals manipulation and more dirt emerged. In a negotiated settlement where Deutsche Bank agreed to pay a $38 million fine, additional criminal activities were uncovered.
The Deutsche Bank documents show, among other things, how two UBS traders communicated directly with two Deutsche Bank traders and discussed ways to rig the market. The traders shared customer order-flow information, improperly triggered customer stop-loss orders, and engaged in practices such as spoofing, all meant to destabilize the price of silver ahead of the fix and result in forced selling or buying. It is also what has led on so many occasions to the infamous pre[c]ious metals "slam", when out of nowhere billions in notional contracts emerge, usually with the intent to sell, to halt any upside moment in the precious metals. [emphasis mine]
Known as “spoofing”, in the age of HFT trading it has become an easy and profitable means for the Big Banks to rig markets. And it wouldn’t be the last time that the Big Banks were accused of precious metals manipulation via spoofing.
Ex-JPMorgan trader pleads guilty to silver spoofing, JPM under investigation
The problem for JPMorgan is that Edwards was working for JPM at the time.
Prosecutors said Edmonds learned the deceptive strategy “from more senior traders” at the bank, and that he “personally deployed this strategy hundreds of times with the knowledge and consent of his immediate supervisors.” His guilty plea related specifically to trading in silver futures contracts, as well as in gold, platinum and palladium futures.
Reluctantly, this forced the United States’ see-no-evil, hear-no-evil, speak-no-evil banking regulators to finally shine a spotlight on the activities of JPMorgan in the silver market.
The result of that investigation was predictable – given Edwards’ guilty plea and the evidence he provided.
That announcement was in February of this year, so the investigation continues. But the bullion banks aren’t alone in manipulating precious metals prices. They have some highly-placed accomplices: Western central banks.
Central banks manipulate gold prices through “leasing” gold
Again, this has never been anything less than an open secret. As far back as 1998, former Federal Reserve Chairman Alan Greenspan acknowledged the role that central banks play in manipulating gold prices (lower) – in official testimony.
“…central banks stand ready to lease gold in increasing quantities should the price rise.”
There is no legitimate commercial purpose in “borrowing” gold since it pays no interest. But nonetheless, a large bullion-leasing market exists – with Western central banks being the primary suppliers of this bullion.
How does “bullion leasing” lead to lower gold prices?
Simple. The Fed lends its gold to some nefarious traders, very likely working in cooperation with one of the Big Banks. The trader uses this borrowed gold to back a large short position.
Then if the trader isn’t required to surrender that gold to satisfy the trade, the bullion finds its way back to the central bank. If it is claimed for delivery, the central bank still claims to “own” this gold – even though there is virtually zero chance of it ever recovering this metal.
This gold “leasing” has been carried on at a large scale for decades.
It is for this reason that many esteemed precious metals analysts have concluded that the claims of Western central banks (and their governments) of massive gold reserves are fraudulent. Any bullion still held by these central banks (since they manage these bullion vaults) is, in fact, subject to claims by one or more “owners” of that gold.
The fact that the United States has conducted no bona fide audit of its gold reserves since the 1950s also raises suspicion with any but the most gullible of observers.
We know this gold-leasing is a nefarious activity for one obvious reason. The central banks never lend their gold to long traders in bullion markets – only the shorts. Market paradigm change – the jig is up
Western Big Banks and central banks have committed a litany of crimes to suppress the price of gold (and silver) in recent decades.
However, one knowledgeable precious metals commentator has made a powerful argument that their days of bullying precious metals markets with brute-force manipulation are coming to an end.
Craig Hemke, proprietor and precious metals analyst for TF Metals, recently came out with an impressive array of numbers on Comex trading in (in particular) the silver futures market. He shared those numbers – and his analysis of them – in an interview with Greg Hunter of USA Watchdog.
Readers are encouraged to listen to the clip to burrow through the details. What will be of greatest interest are Hemke’s primary conclusions.
Because of a massive spike in demand for physical delivery of silver at the Comex, for the first time, JPMorgan (the largest institutional silver-holder) is being forced to cover these deliveries directly out of its own eligible silver stocks
At the rate in which this silver is being depleted (to back JPM’s serial shorting in the silver market), JPMorgan will have completely exhausted its own silver inventories in a matter of months
Based on these numbers and his analysis, Hemke went further. He argued that JPMorgan is left with only two choices, both of which have extremely bullish implications for the (real) silver market – and the price of silver.
a) JPMorgan can get out of the way of this new silver bull and stop shorting into the rally, in which case the silver market (for the first time in 30 years) would be allowed to move (relatively) freely
b) JPMorgan can continue its massive silver shorting, hemorrhage tens of millions of ounces per month from its silver inventories – and then still be forced to stop shorting in roughly 6 months time (at its current burn rate)
What has totally changed the trading paradigm in the silver (and gold) market after all of these years of Big Bank/central bank manipulation?
Stand and deliver
For the first time in the history of precious metals futures trading, a substantial percentage of traders are “standing for delivery”. They are choosing to take physical delivery of metal in their futures contracts in huge numbers -- according to Hemke's research.
In the silver market, traders are lining up to take delivery of silver at the Comex nearly as fast as silver is being mined-and-refined. This is only one source of global demand for silver.
And 4,500 years of accumulated silver stockpiles have been consumed. There is little to no silver available in the world (above ground) to continue to satisfy large deficits in silver demand.
Previously, the bullion banks could get away with the “naked” shorting of gold and silver to suppress prices. They would club markets lower with massive paper shorting of silver and gold – knowing that few of the traders on the other side of the trade would ever take delivery of metal.
All that has changed.
Bullion inventories at traditional dealers ran dry in March as economic/geopolitical/inflation fears caused precious metals demand to spike.
Gold- and silver-hungry investors turned to the Comex. They have begun to stand for physical delivery in record numbers.
“Stand and deliver."
As serial thieves, the Big Banks are used to being the ones extracting valuables from others.
With the Big Banks themselves now on the other side of this equation, these are the three most-terrifying words to the ears of any banker.
Today the gold/silver price ratio is at almost 100:1, after being stretched to an all-time extreme of 125:1 in March.
The normal gold/silver price ratio is 15:1. If the Big Banks lose most of their capacity to manipulate the price of silver (lower), we could easily see the price of silver return to that ratio.
At today’s price for gold, that implies a price for silver of $120 per ounce. Silver is currently trading at just under $19 per ounce.