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Two Inglorious Anniversaries - Craig Hemke (07/05/2019)

A path of gold bars with grass on both sides

May 07, 2019

May 2019 marks two significant milestones for precious metal investors, and we should take a moment to recall each.

First, it was twenty years ago this month that British Prime Minister Gordon Brown began a program of dumping over 400 metric tonnes of U.K. gold. The process that was later dubbed "Brown's Bottom" as it concluded in 2002, with prices at multi-decade lows below $300/ounce. See this link from the BBC: https://www.bbc.com/news/business-48177767

In 2012, Thomas Pascoe of The Telegraph researched this debacle and found that the public reasons given for Brown's decision were misleading, to say the least. Pascoe's original post seems to now have been thoroughly scrubbed from The Telegraph's website, but records of it remain through these links:





If you can learn anything from this unfortunate bit of British history, it's this: Western governments will stop at nothing to support and enable The Bullion Banks as they endeavor to maintain control of price through the current "LBMA/COMEX Gold Pool". Brown's decision to liquidate over half of his country's gold reserves at the price lows twenty years ago simply underscores this unfortunate fact.

This month also brings the eighth anniversary of the May Day Massacre. This event, which occurred on May 1, 2011, saw the price of COMEX silver fall over $6 in a matter of minutes during the usually-quiet Sunday evening (U.S.) Globex trade. It looked like this on a chart printed that evening:

And now, given some recent public disclosure by former CFTC commissioner Bart Chilton, it's quite simple to connect the dots and lay responsibility for this event at the feet of JP Morgan.

If you haven't yet, be sure to listen to this interview that Chilton gave to Chris Marcus of Arcadia Economics back in March of this year. As fate would have it, Chilton passed away from pancreatic cancer about a month later, so this served as one of his final public appearances: https://arcadiaeconomics.com/silver-manipulation/i...

In the interview, Chilton confirmed several basic premises under which we've been working for years, namely:

That JP Morgan had, in fact, inherited a massive COMEX silver short position from Bear Stearns in 2009.

The CFTC expected JPM to immediately begin the process of eliminating this position.

Instead, seeking a profit, JPM actually expanded the position to dangerous levels.


From there, the rest is history. Beginning in August of 2010, the price of COMEX silver began an epic run based upon physical demand and paper short-squeezing. Price rallied from $18 to $48 with the final $10 in April of 2011 coming almost exclusively from a "Commercial" short squeeze, as the CFTC-generated Commitment of Traders reports revealed at the time.

Just as price was ready to escape from Banker control, The May Day Massacre occurred. This set off a wave of speculator long liquidations that was exacerbated by five margin hikes in nine days issued by the CME Group. Price crashed to $26 in days and has since never recovered.

Having been caught naked short COMEX silver, JP Morgan was allowed to rush into existence their own COMEX silver vault. Having no vault and no physical silver had left the bank vulnerable to the 2011 short squeeze, and they—along with the CME—were in no hurry to see this happen again. The result? Over the past eight years, JP Morgan has amassed a horde of physical silver in excess of 150,000,000 ounces. They now have complete domination of COMEX silver by virtue of controlling nearly 50% of the total vault supply. See below:

And, as you can see below in this informative chart from Nick Laird, though the total amount of silver vaulted for COMEX has nearly doubled over the past seven years, this is largely due to the emergence of this JPM vault. All of the other depositories have seen their vault stock essentially remain constant.

How do we know that much of this vaulted silver is actually the property of JP Morgan? All we had to do was follow the monthly delivery reports during the time period when the silver was being accumulated. The deliveries were all made to the proprietary account of the bank and now reside in the eligible category. We wrote an extensive article on this back in 2018, and you should take time to review this post now: https://www.sprottmoney.com/Blog/jpmorgans-dominat...

So, in summary, based upon the "testimony" of a dying Bart Chilton, we can now deduce:

  1. After acquiring Bear Stearns' massive COMEX silver short position in 2009, JP Morgan greedily worked to build the position to an even larger and more dangerous size.
  2. Upon being squeezed, JPM and the CME Group worked in unison to smash price and rescue the bank from a rather precarious situation.
  3. The CME Group then rushed approval of JPM's own COMEX silver vault.
  4. JPM has used the intervening years to accumulate a vast stockpile of nearly 150,000,000 ounces of silver.
  5. This silver is now held as physical "protection" against another 2011-style price event... meaning the next time price accelerates to the upside, JP Morgan will have the option to physically deliver silver against their short position... which is a far better outcome than the nearly-unlimited losses that could occur in a naked short squeeze.


So, what's the point of all this, and why take time to type a post that recalls these events of twenty and eight years ago this month? Simply: just to remind you that in 2019 The Bullion Banks and their enablers at the CME Group, the CFTC, and in London continue to seek to dominate and control price. However, as with The London Gold Pool of the 1960s (https://en.wikipedia.org/wiki/London_Gold_Pool), this modern day LBMA/COMEX gold and silver pool will also reach a point of self-destruction.

WHEN that day comes, you want to be certain that you own only true, physical precious metal. Not shares in an ETF, and certainly not ownership in any kind of unallocated or pooled account. Only physical precious metal will break The Banks, and only physical metal will protect you when the day of Bullion Bank capitulation finally arrives.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.