24 October 2013

Gold Daily and Silver Weekly Charts - Straining at the Leash

Yesterday we had 32,000 ounces of gold bullion come into customer storage at HSBC, and 64,000 come out of customer storage at Scotia Mocatta.  There was no movement in the registered category.

If you look at the last chart, you can see the details of the individual warehouse holdings.  In addition to outlining the movements of bullion in and out, in green and red, I have also rank ordered the holdings of registered bullion in blue.

As you can see, JPM by far holds the most registered bullion in their vault.  As a reminder, the Comex has on that same statement the disclaimer that they take no responsibility for the bullion statements given to them by parties they assume to be reliable.

Mr. T Ferguson had an interesting commentary today wherein he rightly noted that JPM brought in a couple of tranches of gold into the Comex recently that were 'exceptionally round numbers.'  And they were, down to the metric tonne.

I had assumed that this bullion came from a single source, and it has to be in 100 oz bars as you will recall.  And it has to go through a process to be admitted to the Comex, although by the disclaimer we see that JPM is the party standing behind that statement, and no one else that I can determine.

So, if the bars were received, let's say, from storage by an agreement with some central bank on a lease arrangement, I wonder if one would bother with going through the laborious process of refining them again into bars, or merely recertifying them with a friendly refiner.  And one has to wonder if they are 'unemcumbered' by any conflicting claims.

But what struck me as most odd on the JPM front is how much of the registered gold they are holding, around 283,102 ounces out of a total of about 707,000.  That is about 40 percent of the total registered gold.    I thought they were trying to get out of that business of storing and dealing gold.   

However this turns out, I suspect we will not see the details of what has been going on up close.  But my opinion is that it will be advisable for traders to start settling up now as best they can, and not try to get lucky and skin a few more dollars out of a market whose fundamental structure is starting to look dangerously unstable.  

And if I were in the Exchange or the Regulator, I would not hope to stand quietly behind the fig leaf of my disclaimers and otherwise-too-busy-to-look-and-understaffed life, and start giving a look at what the heck is going on behind closed doors.   Maybe I am wrong, but I see smoke starting to come out of the cracks and seams.

It looks to be about one significant event away from a serious debacle that could prove to be highly embarrassing to a number of Very Serious People.  Not to mention otherworldly economists, bankers, and pundits who dwell in the realms of well spun models land.

But what do I know.  I am just a humble proprietor of my little domain.

Have a pleasant evening.