Is JP Morgan Buying The Physical Gold From GLD ETF?

Much has been written about the mass exodus out of the GLD. Based on the fact that gold is not consumed and that newly mined production is very small compared to the existing above the ground gold in existence, it is a fact that someone has been buying the physical gold that has been leaving GLD.

While the focus of most news was negative around the exodus out of the GLD, we have been repeating that the important question is who the buyer was. We did so for instance here Gold – You better hold it and here Gold In 2013 – Too Many Mysteries Remain Inexplicable. This is what we wrote:

To put that figure into perspective, it is 30 times larger than the gold holdings of Cyprus; it would be the 18th largest gold holding in the world, comparable with the ones of Saudi Arabia and the UK.

The point is not the sale of the gold as we know it is caused by investor liquidation. The key question is who has been buying these gigantic amounts of physical gold? The gold is not being consumed, so it is in some hands right now. Which ones? It seems no clear answer exists at this point.

That question remained underexposed in our opinion because identifying the buyer(s) helps putting the ongoing trend in the precious metals in the right perspective!

Up until now, our working assumption was that some of the bullion banks and/or large investors have been piling up on physical gold from GLD. We had not the means to provide evidence of this. Here is one of the world precious metals expert, who is following the markets closely for three decades, who confirms our thoughts.

What follows is Ted Butler his answer on the question who has been buying the 10 million ounces of physical gold (320 tonnes approximately) since the beginning of this year.

It is widely reported that the 10 million ounces of gold that came out of the GLD have been bought by India or China, even though substantiating data is lacking. Let’s only consider the facts that we know. The 10 million gold ounces that came out of the GLD equals roughly 100 million shares of GLD (one-tenth ounce per share). The 10 million ounces that are no longer in the GLD still exist and, therefore, must be owned by someone. We know that the reason the shares were liquidated in GLD was due to the rotten price performance that weighs on metals investors’ minds. This tends to eliminate China as the big buyer; as such buying would cause gold prices to rise, not fall. The shares were sold and metal redeemed because the price went down, largely a self-reinforcing spiral. We know how much was sold and who the sellers were. What we don’t know is the identity of the buyers. There is a good reason for that. The buyers have tried mightily to hide their identity.

I believe that the big buyer of the 10 million ounces of gold liquidated in the GLD was JPMorgan, either alone or with other collusive commercial banks. The same methodology I’ve previously attributed to a potential Mr. Big in SLV (also probably JPMorgan) is at work in GLD. If one (or 2 or 3) big buyers in GLD had merely purchased the 100 million shares that were sold in GLD, that would have quickly pushed the big buyer(s) over the 5% SEC reporting threshold thereby revealing their identity. But by having the gold redeemed out of the trust and the metal being purchased (instead of shares), stock reporting requirements are evaded. A single holder, perhaps working with a few collusive partners, have come to own what is, effectively, almost a quarter of the world’s largest gold stockpile and no one is the wiser.

I’m not suggesting that JPMorgan did anything wrong by intentionally evading SEC reporting requirements. That potential infraction pales in comparison to the real crime. In this crime (actually more egregious in silver than in gold) the crooked bank manipulated gold prices lower, via the usual COMEX price-fixing mechanics, to induce GLD shareholders to sell. This was a planned and executed operation that left no stone unturned.

From late November, the commercials as a whole, bought more than 160,000 net COMEX gold contracts on declining prices, the equivalent of 16 million ounces. When you include what came out of the ETFs and exchange warehouses it adds an additional 15 million ounces. Together that totals 30 million ounces ($45 billion). Options and over-the-counter derivatives transactions could double that amount. This likely brings the total of their purchases to 50 million ounces ($75 billion). This sound like a huge number but it’s quite manageable for these big banks and it represents a small fraction of the total derivatives market. The scope of their purchases is enormous and the bullish implications are staggering.

I believe that JPMorgan and the commercials have come to hate the COT and Bank Participation reporting data because it reveals what they are up to in exquisite detail. Wrong doers prefer to operate in the dark, under rocks. But the one thing the available data shows is that the big buyers on the wicked price decline have been the commercials. On the one hand, I find it deplorable that big banks are allowed to manipulate our markets for their own benefit, making a mockery of our laws and corrupting our regulators. On the other hand, watching JPMorgan and the commercials buy so aggressively in gold and silver only leads to the conclusion that these crooks have a plan for much higher metals prices to come. If, as I contend, JPMorgan picked up at least 20 million gold ounces they shook out from the GLD and elsewhere, a $300 dollar gold rally will net them $6 billion in ill-gotten gains on that position alone. It could be much more if they are more ruthless in creating higher prices. Generally, with these crooks they usually exceed what you think they are capable of.

It appears to me that JPMorgan and their ilk have bought absolutely massive quantities of gold and silver in many different markets. Unfortunately, much of that buying has come as a result of the deliberate and successful manipulation of price in order to force others to sell. I don’t believe that is fair or even legal. Nevertheless the bloodless verdict of the market suggests we are going a lot higher at some point soon.

Courtesy of Ted Butler – We encourage readers to subscribe to his excellent premium service.

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