JPM and Goldman building big positions in physical gold and silver – Butler

The following article has been written for the Sharps Pixley website but as this is down temporarily am posting it here.  It will appear on the Sharps Pixley site when that is up and running again.

Sharps Pixley site is now up and running again and this post now appears there too.

Precious metals specialist, Ted Butler, is nothing but forthright about his views on the big investment banks, notably JP Morgan as top of his list of the ‘baddest dudes’ in the sector.  To this he has added the financial sector’s other frequently recognised ‘bad dude’ – Goldman Sachs – accusing them both of playing the markets in such volumes that they totally dominate them and frequently calling them out in what he describes as ‘criminal’ manipulation’ of these markets.  Obviously the regulators disagree, or just turn a blind eye. And, in any case as we have pointed out before if any of the mega investment banks are called out on their activities and subsequently fined for, at the very least bending the rules, the size of the fines, even though they may be millions of dollars, are tiny compared with the money made and probably just considered a normal cost of doing business.  It would probably take senior executive jail time to have any impact and, with the establishment (the swamp) protecting its own that would seem unlikely.

Ted’s latest accusation is that he now has conclusive proof that those two entities, which he sees as the ‘baddest dudes in the hood’ are taking 80% of all COMEX silver and gold deliveries for the first time in nine months in the case of one and much longer than that in the case of the other.  That has made him really sit up and take notice.

In Ted’s view there is only one basic reason for why anyone would buy and take delivery of anything.  As he says that is ‘that they think it will go up in value. No one buys and takes delivery (paying full cash value) for an asset expected to decline. That Goldman Sachs is now taking delivery of COMEX gold and silver, second only to JPMorgan, should send strong signals to anyone interested in these metals as an affirmation to do likewise.’

Ted goes on to note, as anyone who follows his extensive research will know, that JP Morgan has held the largest paper short position in the silver market for over ten years even though it also holds probably the world’s largest accumulation of silver bullion having been building this up for the past six and a half years..  In Ted’s view ‘the bank is taking advantage of the low prices its paper short position helped create to buy up physical silver at a bargain price. Until it started covering in this week’s COT report, JPM held its largest paper short position in years, only to turn around and add another 10 million physical ounces to its hoard this week.’

The recent gold price declines (and similar in the other precious metals)  bear all the hallmarks of being engineered through futures markets notional transactions and Ed Steer ( – note revised web address) comments in his today’s newsletter that JP Morgan and Goldman Sachs again appear to have been the main buyers of physical metal on the dip for their own in-house and proprietary trading accounts.  As Ed puts it in his newsletter: ‘It’s been a really weird delivery month so far.  There have been 5,995 gold contracts issued and stopped, plus 5,147 silver contracts.  HSBC USA has been the big short/issuer in both metals — and JPMorgan and Goldman Sachs have been gorging themselves’ –  at least in the gold accumulations.  In silver, the other big buyer has been Scotiabank which Ted Butler tars with much the same brush as JP Morgan in terms of silver market manipulation.

If Ted and Ed are correct then it looks like JP Morgan and Goldman Sachs could be positioning themselves for a big turnaround in the precious metals markets led, of course, by gold.  When gold rises the others in the precious metals complex tend to do so too.  But here again it is a question of timing.  Maybe the New Year could be looking good in this respect.  January tends to be a positive month for precious metals.  It will thus be interesting to see how Goldman’s commodities analysts – normally bearish on gold in particular – will rate precious metals prospects at the year-end and at the beginning of 2018.


Dollar down, equities down, gold up, silver up more

Article first published earlier today on 

There was something of an overnight melt-up in gold, and even more so in silver, which started in after-hours trade in New York, and continued in Asia.  The SGE am gold fix came in at CNY 265.25 per gram and the pm level was CNY 265.54/gram – respectively around $1,273 and $1,275 an ounce and later trade around Asian closing and European opening saw it touch $1,280 before slipping back a few dollars at the time of writing.

Silver continued its recent pattern of moving up faster than gold in percentage terms with the Gold:Silver ratio coming down below 72 – it was hovering around 83 only just over a month ago.  It reached a spot price high of around $17.90 an ounce before it too lost a little ground as European markets opened.

The rise may have been triggered by something of a late sell-off in general equities in the U.S., which continued with Asian markets down sharply overnight, and European bourses opening lower.  The dollar index was also a little lower in continuing fall-out from the Bank of Japan decision not to increase stimulus, and a no-change U.S. Fed position.  There were also some disappointing economic data out of the U.S. with the Q1 advance GDP figure coming in at only 0.5% up year on year, which was below market expectations.

The latest gold price move, if it is sustained, will be yet another blow to the Goldman Sachs call in February to sell gold short.  In retrospect very bad timing by the GS analysts.  Indeed one might consider gold’s performance since that mid-February call doubly remarkable given Goldman’s clout in the financial sector.  At the time of the short gold call it was trading just below $1,240 and indeed did fall back sharply by around $30 in the couple of days following before making something of a recovery.  The current price, near $1,280 puts it close to Goldman’s stop loss level and if momentum is sustained then this could be reached.

Where Goldman has gone wrong is that it had assumed the U.S. Fed would be well into its rising interest rate programme by now with a second increase in place and another couple due.  But currently the consensus among financial analysts in the U.S. is that a second Fed rate rise is unlikely before September at the earliest, if then.  One suspects that the Fed, as last year with its initial increase, may bounce itself into a second rate increase late in the year if only to try and retain some credibility in its forecasting, whether this is truly justifiable or not.

What may be going in Goldman’s favour yet though is that May is now only a couple of days away, and in most years gold tends to weaken May to September – although not always.  It should thus also be remembered that in 2011 when gold hit its plus $1900 peak, it strengthened hugely through June, July and August.  Are we in for a repeat?  At the moment the force is with gold – and even more so with silver.  That can turn around rapidly, of course, but a close above $1,275 this weekend could be taken as a signal of higher moves into the beginning of May – particularly if there is continuing nervousness in general equities.

Goldman Sachs could be caught short on gold

The most recent call by Goldman Sachs to once again sell gold short has not, so far been a good move by the investment bank, and it comments in its latest research that it is down 5% on the call – with a stop loss indicated at 7%.  But, it also reiterates that it remains confident in its bearish viewpoint and that it still stands by its near-term gold price target of $1100 per ounce and longer term target of $1000.

Of course the big anomaly here is that Goldman and its followers between them have the financial clout to go a long way towards pushing the price back downwards in these days when the western gold price is still largely set on the COMEX paper gold futures market….

The above are the opening paras of my latest article on  To read the full article click here

What does this year’s PDAC tell us about the gold price?

Perhaps some might suggest the Prospectors and Developers Association of Canada (PDAC) annual mineral exploration exaggeration-fest should be renamed the Promoters, Deceivers and Carpetbaggers Convention given how few of those mineral explorers pushing their projects will ever see them brought into production.  Maybe that would be a little unfair, though, as those explorers and developers that grace the PDAC as exhibitors nowadays tend to be among the better of the many hundreds of juniors, but there’s little doubt even these harbour more than just a few dogs among them.

This year, the recent upturn in the gold price, gave the miners and explorers something to cheer them up.  Gold has bottomed, it is back in a bull market, they chorused, although there were quite a few words of warning from some of the more circumspect speakers at the convention – but not so from the explorers and promoters intent on talking their own pet projects up.  Promoters are like politicians – always looking to put a positive spin on things however dire their particular project may actually be.  Unfortunately this malaise also filters down to many of the actual mining companies (even some of the biggest) who seem to see themselves nowadays as primarily being in the business of keeping their investors happy through putting the best possible, but sometimes misleading, light on their latest sets of results and forward targets.  Some of this is human nature and thus deep seated in a mining CEO’s psyche – to run a mining company one has to be an eternal optimist.  If not one would be doomed to depression and worse.  I recall the CEO of a big Philippine mining and metallurgical company telling me a number of years ago that one has to be a masochist to be in the business!

But the PDAC is something else.  It is both a great Convention, but also one which can bring out the worst in delegates and even among the organisers who deep down give perhaps unwitting tacit support to a sector of the industry which perhaps attracts more than its fair share of carpetbaggers.   I was there the year an investor shot and killed a fellow attendee, who he felt had wronged him financially, on the escalators inside the Royal York hotel.  Indeed I even heard the shot from a distance, although it sounded like someone had banged a tin tray and thought nothing of it at the time. I was also there the year the Association’s highest award went to someone who’d recently been in jail on fraud charges – these were both in the days when the event was held in its entirety in the Royal York hotel.  This was before it moved to the Convention Centre more than doubling in size, and quadrupling in attendance through the ‘Investors Exchange’ section for the junior miners and some others to promote their projects from exhibition booths.  Presumably very profitable for the PDAC itself and for Toronto’s hotels.

This year’s PDAC saw attendance fall for the fourth successive year – see chart below borrowed from controversial and often extremely irreverent (some might say sometimes scurrilously accurate) mining blog Inca Kola News, which gets far more readership than does this scribe’s efforts.  (Perhaps Canadian libel laws are rather less demanding than UK ones).  It is great, though, at pointing out many of the reporting anomalies, and ego trips among some mining CEOs, that tend to tarnish this great industry.

PDAC attendance

The fall in attendance, though, is hardly surprising given the state of the industry and the huge turndown in mineral exploration activity for both precious and industrial metals and minerals which has resulted.  PDAC attendance is indeed a veritable barometer on the state of the industry as a whole.

Part of the problem with the junior mining sector is that the companies are largely run by geologists with no real business experience, often in league with promoters who have little technical knowledge, but do know how to hype shares and raise money from often gullible investors.  There’s nothing wrong with good geologists – but they have to be among the most optimistic of souls and often lack the nitty-gritty expertise of mining and metallurgical engineers who have to turn a promising project into profitable reality.  Indeed geologists tend to look down on mining engineers – and vice  versa .  Engineers tend to be pragmatists while geologists are often dreamers.

But so saying the PDAC is, as noted above, a great convention providing one can see through some of the hype surrounding the industry.  It demonstrates the enormous enthusiasm for an unpopular industry.  Unpopular with the general public that is, partly due to the environmental sins of modern-day mining’s forefathers and partly due to the often hugely exaggerated potential problems in bringing a new mine to production as expressed by NGOs and environmentalists around the world, who often may have hidden agendas which are seldom revealed.

The convention does nowadays – perhaps more so than it did historically – attract the real great and good of mineral exploration and mining, as well as the bad and the ugly, and in terms of a technical mineral exploration exhibition and conference has to be among the world’s best – if not the best.  Nowadays with the big investor attendance too, there are some great financially-oriented presentations at the conference itself, and commentary on its fringes, and most of these are thankfully free of the hype one hears on the convention floor.  Yes there are metals and minerals bulls making their cases, but these are usually well-reasoned, as indeed are those who may warn of impending doom and gloom.

But perhaps it is the sideline comments rather than pre-prepared presentations which are the best indicator of where the mood lies and which give the best advice.

As pointed out in an article I have written on this year’s convention for –  PDAC in retrospect. Is the recent gold rally sustainable? a number of these well-regarded observers express doubt that the recent rally in the gold price, which has seen the precious metal rise around 20% from its low of last year, is sustainable in the short to medium term, although most would agree that they feel the bottom has indeed been reached and longer term, without committing themselves to any real timescale, that gold is indeed on the way back up.

Of course there are still some pretty heavy hitting doubters out there, and some of these carry considerable financial weight behind them which will likely be utilised to protect their own positions.  Goldman Sachs for example has just put out a note that says “We also maintain our bearish view on gold that has rallied along with the other commodities. Our short gold recommendation (which we opened with a 17% upside, in line with our $1000/toz 12-m forecast) is currently at a c.5% loss, with a stop loss at 7%.”  An article on calculates that this stop loss position will be reached if gold hits $1291 – its back at $1270 as I write, after a pullback (correction some would say) to the $1240s.

Gold is indeed having trouble breaking out above this $1270 area, but some would put this down to the big money bears trying to protect their positions.  Many believe the big bullion banks, which may have the wherewithal to do so, are very much in cahoots with the U.S. Fed in trying to suppress, or at least control, the gold price as rising gold is seen as an indicator that all is not well with the dollar and the U.S. economy – contrary to the political spin of the day!

Interestingly, as pointed out in the Sharps Pixley article referenced earlier, Jeffrey Christian of New York’s CPM analytical group – an observer not exactly loved by the out and out gold bulls – suggested that the Goldman Sachs ‘sell gold short’ call and predictions of a gold price fall back to $1,100 and below was rather out of touch with precious metals fundamentals, although he was also one of the PDAC attendees suggesting that the recent rally was not sustainable in the short term but that gold would indeed start to turn up sustainably by the end of the year..

But, as always, the gold price is hugely difficult to predict.  At the PDAC it is easy to get carried away by the overall optimism – clutching at straws the bears would say – that the gold price is indeed on the turn, and for the better.  Time will tell if they are right this time.  They will be eventually.

In the writer’s view gold’s fundamentals are indeed looking stronger, but stronger fundamentals don’t necessarily mean the big gold price surge is yet at hand.  There’s too much big money out there which seems determined to hold it back.  The big question is whether this money can be overwhelmed by external forces as the global economy seeks to reset itself.

JP Morgan joins the ‘Usual Suspects’ in LBMA gold benchmarking process

The ICE Benchmark Administration website now shows that JP Morgan Chase has become the seventh Direct Participant in setting the twice daily LBMA Gold Price benchmarks – a selection which will be indeed inflame those gold price manipulation-believers who reckon that JP Morgan and Goldman Sachs are behind almost any irregularity in global financial markets.

Lawrie Williams

If any selection could be seen as inflaming the gold price manipulation-believers, it would be the addition of JP Morgan as one of the new participants in the LBMA Gold Price benchmarking process.  And guess what?  ICE Benchmarking Administration (IBA), which runs the new benchmarking process, confirms that indeed JP Morgan has joined the Direct Participants in the new benchmarking process – not by any announcement, but just by the inclusion today of JP Morgan Chase on its website as being among the members of the panel which now sets the twice daily London benchmark gold price to replace the old Gold Fix.

So the original four members of the old London Gold Fixing panel – Barclays, HSBC, Scotiabank and SocGen – have now been joined by Goldman Sachs, JP Morgan and UBS as the Direct Particpants which now set the new gold price benchmarks.

Before the new panel of Direct Particpants was finalised it had been widely believed that one or more of the Chinese banks – Bank of China, ICBC and China Construction Bank – would be among the new members – a speculation which was never squashed by the LBMA – and right up to the first application of the new electronic benchmarking process a week ago many believed that indeed one or more of these three banks would indeed be involved in the process. It was not to be, although all of them would appear to meet the qualification terms for Direct Participants (Ordinary Member accreditation from the LBMA; Individuals with appropriate experience, skill and training; Organisational and governance arrangements; Appropriate credit lines, or equivalent arrangements; Clearing/settlement arrangements with existing Direct Participants) and it had been announced that the three Chinese banks had indeed expressed interest in being among the first Direct Participants.  Why none have become involved so far has not been made apparent.

If the reason for replacing the almost century old gold price benchmarking process had been brought about because it was beginning to be seen as being potentially open to price manipulation by the participants, something which is totally unproven and has always been hotly denied, then the selection of the banks which had formerly been involved as partipants in the new process, plus Goldman, JP Morgan and UBS, seems to have just been a red rag to those gold bulls who believe the gold market is indeed manipulated.  The new LBMA Gold Price participants are viewed by this price manipulation-believing sector as being those who are already probably most involved in finacial manipulation of the system.  They will now reckon that this just confirms their belief.  JP Morgan and Goldman Sachs in particular are very much the betes noires of the manipulation believers.  And they will also see the apparent freezing out of the Chinese banks as just confirming their viewpoint.

Thus one suspects the manipulation-believers will remain up at arms over the new London gold benchmarking system until the number of Direct Participants is broadened to include some members who are seen as being outside the current western financial elite.  And even if this happens, they will still undoubtedly find other points to criticise.


Is the new LBMA Gold Price just another Fix? $1171.75 the first new benchmark price

The first LBMA Gold Price benchmark price has come in at $1171.75, but the make-up of the price setting participants continues to raise questions.

The new LBMA Gold Pricing benchmarking process came into effect today and the 10.30 am price set under the new system was $1171.75 – but the make-up of the initial direct participants in the new ‘fix’ is somewhat mired in controversy.

Many had believed the number of direct participants would be expanded into double figures and include at least one Chinese bank – or possibly even three – among its numbers.  In the event it appears that the direct participants in setting the LBMA Gold Price, as it is now called, comprise the four banks which were involved in the old London Gold Fix, plus two more only (Goldman Sachs and UBS) – and no sign of any Chinese involvement.  In a prior article on – I had commented that it was by no means certain that there would be any Chinese participation at the start – see: Fixing the Gold Fix – with or without the Chinese banks?, which obviously has proved correct.   The fact that, in the event,  by far the world’s biggest gold consumer – whatever the World Gold Council and GFMS may say in their analyses, which uses a very limiting definition of consumption – should not be involved in the new benchmarking process may well indeed be seen as a ‘fix’ in the worst connotations of that word in  modern parlance.

We do assume though that there will be sufficient pressure on the London Bullion Market Association (LBMA), which owns the intellectual property to the London benchmarking process, and ICE Benchmarking Administration (IBA), which is handling the mechanics of the process, to involve participation by one or more of the three Chinese banks which have expressed interest in being involved and would appear to meet the strict qualification terms imposed.  These are the Industrial and Commercial Bank of China (ICBC), the Bank of China, and China Construction Bank.  The first of these is the world’s largest bank in terms of assets and it seems to an outside observer that it is inconceivable that any true new gold price benchmarking system should not at least include the world’s biggest bank from the world’s largest gold consuming and producing nation.  Outside observers may also well reckon the selection of the new process participants does indeed comprise a ‘Fix’ in order to try and maintain the status quo for as long as possible.

Indeed the LBMA and IBA have been remarkably tight-lipped so far about the selection process for the new LBMA Gold Price participants, or even as to who was going to be the ‘chairman’ of the benchmark setting group (despite this being supposedly a fully electronic process).

So why are no Chinese banks involved?  Undoubtedly the LBMA/ICE will come up with some spurious technical reason which has so far delayed any Chinese inclusion and that they will be working towards some Chinese involvement – but exactly when this might occur will probably be unspecified.  There may undoubtedly be a fear that once the Chinese banks are involved, the Western bullion banks which have set the London gold price benchmarks for nearly 100 years, will eventually lose control of the process and the Chinese will come to dominate it given the seemingly ever-growing demand for gold there and in other Asian nations and the huge physical gold flows from West to East.