EmptyVaultWith JPMorgan’s COMEX gold vault down to all-time historic lows and the firm looking at a $1 billion settlement with FERC over Blythe Masters’ manipulation of the electricity market, JPM has just announced shocking news that the firm is seeking a sale, spin off or strategic partnership of its physical commodities business.

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Yes, you read that correctly.  Blythe and Jamie are apparently attempting to unload the empty gold warehouse hot potato as soon as possible.

Just to be clear, we say this half joking because they’re not ditching their COMEX precious metals vault business nor ending their own precious metals vault.  But given the recent pressure from regulators — $1 billion FERC settlement, investigation into aluminum stockpile warehousing, etc. — what better way to distract from core paper derivatives trading than to exit secondary, direct physical market activity?”

From JPM:

J.P. Morgan to Explore Strategic Alternatives for its Physical Commodities Business


New York, July 26, 2013 – JPMorgan Chase & Co. (NYSE: JPM) announced today that it has concluded an internal review and is pursuing strategic alternatives for its physical commodities business, including its remaining holdings of commodities assets and its physical trading operations.


To maximize value, the firm will explore a full range of options over time including, but not limited to: a sale, spin off or strategic partnership of its physical commodities business. During the process, the firm will continue to run its physical commodities business as a going concern and fully support ongoing client activities.


J.P. Morgan has built a leading commodities franchise in recent years, achieving a top-ranked revenue position. The business has been consistently named as a top client business in Greenwich Associates’ annual client surveys and was recently named Derivatives House of the Year by Energy Risk magazine.


Following the internal review, J.P. Morgan has also reaffirmed that it will remain fully committed to its traditional banking activities in the commodity markets, including financial derivatives and the vaulting and trading of precious metals. The firm will continue to make markets, provide liquidity and offer advice to global companies and institutions that have, for years, relied on J.P. Morgan’s global risk management expertise.




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    • Whether you win or lose in this game, they win. Fiat money. In a broad sense, this term denotes all kinds of money that are made legal tender by a government decree or fiat. The term is, however usually reserved for legal-tender paper money or coins that have face values far exceeding their commodity values, that are NOT redeemable in gold or Silver, & that purchasing power in the various demoninations materially less than that of full-bodied gold & Silver coins of equal demoninations. The continenental currency issued during the American Revolution, the “greenbacks” of the American Civil War period & the paper marks issued in Germany in the early 1920s are historical examples of fiat money. Excessive issuance of fiat money leads to its depreciation in value~∞

    • @zman yes they will still be in the paper trading markets, they are just pulling the plug on the physical!  Which means that PHYSICAL prices of most commodities will go crazy because inventory will be running dry.  JPM used to take the other side.. No more..

    • Every time I hear some politician shooting off his / her mouth, I am reminded of the old saying of, “It is better to remain silent and be thought a fool than to open your mouth and remove all doubt!”.

    • Of course, but they are not going to be pointed a finger at when the vaults run out off gold and silver. Read about Gold Fixing and think why the Rothschild exited the Gold Fixing and retail banking, the ever winning casino? I think by that time they have already accumulated all they needed and just wanted to off-load the empty egg shell to some scapegoats. Do you think average Joe Schmo follows the gold and silver ticker? The average Joe Schmo still believes that OBM was behind 911.

  1. The fed made some noise about commodity trading in the big banks, they have been tipped off that whatever is coming will cost them some profits, so they need a ‘partner’ to absorb some of those losses.  In return, the CEO of the new partner will receive his own presidential cufflinks and a ‘getoutajailfree’ card.
    The USG will continue to use whatever tactics are required to keep a lid on the prices of silver and gold until they just can’t.  I laughed at today’s close in silver, $19.99.  The $20 cap is nailed to its head.

  2. The Doc and I just finished recording this week’s Metals & Markets show and I talk about this story in detail. The physical market in question here are the supplemental operations JPM and Goldman Sachs and others have gotten into aggressively within the last decade, roughly. We’re talking about warehouse operations to store base metals, food stuffs, etc. We’re talking about leasing of oil tankers to attempt to have greater control (and extra profit) from oil trading (above and beyond futures market activity). We’re talking about pricing of electricity at the point of movement on the physical grid. Get it? NOT options and futures exchanges and the derivatives market overall that has been their cash cow for decades….

    But there is indeed an INDIRECT link to what’s going on with their massive decline in COMEX gold inventory. The COMEX and LBMA bullion futures and forwards markets are under extreme stress on account of plummeting confidence in the ability of those institutions to actually deliver physical against contracts. That’s also a big part of the reason why GOFO has been negative for a record setting stretch of time, and why there is short-term backwardation. Confidence in the system is on the decline and people want gold and silver in hand more so than being willing to take what should be an easy trade of simultaneously selling physical today and buying the same amount to be delivered via a futures contract one month forward (you don’t want to do that if you think the system is at risk of failing to deliver one month forward, so gold in hand today is worth more as expressed in terms of the prices the fractional reserve gold system generates). All that said as background, as we see the natural outgrowth of all this declining confidence — JPM’s crashing gold inventories at the COMEX — the regulators are starting to come out of their coma and are starting to look around. It’s not that they want to look around. Believe me. They’re probably just as happy to keep surfing internet porn and sticking Bart Chilton out in the media to say, “we’re looking into it.” But 2014 is an election year and over at the marble nuthouse known as the US Congress, some politicians are starting to feel pressure to “do something” about banking sector corruption.

    If you were Jamie Dimon, what would you do? Well, how about shifting focus of general criticism. Give up this ancillary physical market operation. It’s about the same level of pain as the occasional slap on the wrist fines that investment banking firms sustain when they’re busted for manipulation of energy, LIBOR and other markets. Exiting the physical infrastructure add-on business gives the bankers the ability to say to politicians, “Yes, we’re sorry, our actions did add to the cost of overall commodities products but we’re out of that business now so please, leave us alone.” Meanwhile, their core derivatives market operation in gold, silver, interest rate swaps, oil and on and on continues.

    Tune into the radio show this weekend for more. I will not likely have much time to post follow-up comments this week because I’m producing a concert for a non-profit I run and I’m totally swamped. But I’ll have more time from August 3rd onward and I’ll make a point of returning to this subject after August 3rd.

    • Gensler wants to step down in august and Chilton has not been confirmed for another turn, will be interesting to see who is next in charge and if anything may change.

    • Eric, without yet perusing the details, is this a blanket directive to exit ALL physical involvements? Does it cover copper, aluminum, et cetera? How the Morgue (or ANY bank) could be involved in physical commodities AT ALL, is ONLY explained by Ruse-a-veldt’s ‘Treasury Directive of 1933, where he handed over carte blanche control of EVERY THING to the Treasury Director, completely disregarding all semblance of difference between money and production (a signature feature of Communism).

    • @PatFields:  I only know what JPM said in their press release.  I haven’t looked further.  Perhaps, given that these operations are profitable pretty much across the board, they’ll probably figure out some qualification/justifications to keep some business activities ongoing.  Who knows?  They don’t exactly have a history of being true to their word.
      The 1930s over-reach partially corrected itself in the post-WWII era.  There really was a clear dividing line between commercial banking and investment banking, thanks to Glass-Stegal.   But even before the Clinton era repeal of Glass-Stegal, the regulatory climate started to erode.  The has been a lot of coverage about Goldman Sachs’ messing around with aluminum warehouses, which offers good context on the history of deregulation that led to this mess.  If you click here you can see the sort of Google search that will pull up articles with context on just that.

    • my point is with gensler leaving and chilton likely out shortly as well there will be a new team, same old song or change?  I dont know but am interested to see who is named in their place.

    • The story is 100% factual.  It’s just that people are interpreting it incorrectly (see my post above for what the story really means, as well as what are rational speculations about what it might mean above and beyond the raw facts).  I agree with you about Steve Quayle.  He’s what I call a relay station.  He takes core concepts about what’s going on in financial news — dug-up by real investigative analysts  — and reports it as if it’s coming from his so-called sources.  Toss on all the other layers of sensationalist conversation that can’t be proved definitively like giants walking the earth thousands of years ago — things that have little to do with finance but feed into his version of crisis-times-talk and presto, you build an audience of people that know nothing about professional conspiracy research, have little critical thinking skills, etc.

  3. This reminds me of how the White House releases info, After the markets have closed on Friday evening at the beginning of the weekend. I Wonder what Sunday night-Monday morning will bring. A rise in the metals or a fall? They got silver just under $20.00 for a going away present.

  4. WE all knew this was going to happen.  So what to do now?  Gold and silver to rise?  Do we believe the hype or hunker down with Phys? 
    I think we are being played for fools.  I have been a stacker since 2010.  Bought at the height of silver and gold.   I am fu**ed from a profit standpoint.  But I did not buy to make a profit, just to protect my wealth.  So what do I do know?  Buy or stand firm?
    I think we are on a roller coaster down.  I am holding firm, unless  someone can convince me otherwise.

    • Hang in there brother. Stand firm. These absurdly low prices are a joke and will not last much longer. Miners are going broke….so we will see massive shortages and broken supply chains unless prices recover and are substantially higher from here.
      QE has not, and will not, end anytime soon. There is no reason at all to sell your PM’s in this environment.

    • Ordinary Joe  … “I think we are being played for fools.  I …  Bought at the height of silver and gold.”

      It’s ‘tough love’ time. You’ve been ‘played’ for a fool … your entire life … because you’d been brainwashed into believing that a stinking piece of paper can EVER actually be money. You STILL think in that framework, which is the basis for your confusion and uncertainty.

      Now listen up and learn this lesson. I won’t take this back to 1912, ONLY to stay ‘current’. When government was (a little more) restrained from interfering in our private commerce, a gallon of gasoline (in 1960) cost 107.6 grains of silver (31 cents), or 4.62 gallons per Troy ounce. At the exact same rate, RIGHT NOW, your Troy ounce equates to 5.57 gallons … AFTER a half century of unprecedented currency inflation! So, when you compare ‘apples to apples’, that is physical money to physical goods, YOU’VE REALLY GAINED A LOT, despite the fact that the phony ‘value’ of the Plantation Scrip stamps has been temporarily manipulated ‘up’ against your silver. Even now, you’ve wiped out ALL that inflation AND STILL gained about 25% in REAL terms. To go back before this damned paper excuse for money began to poison our economy, would reveal ASTOUNDING results in comparison. THAT’S what we’re looking forward to.

      Granted, the practical perceptions for OTHER people still revolves around the paper illusion, so we’re stuck in it for a little while longer. But, YOU have to get out of that box, as a holder of metals, and view the world in REALITY and make your plans accordingly, BEFORE that reality smacks those others like a full-swing 2×4 across their butts.

      By seeing real ratios as they’d existed before, you KNOW where you stand and you KNOW what to do, WITHOUT any ‘expert advise’. If you’d absorbed this lesson, you should NEVER have to ask such questions again.

    • Pat is correct, but I would add that averaging your cost basis lower is not a bad thing, as long as it doesnt take you to a point where you may be forced to sell just to pay bills. If you only put enough $ into metals that you’ll not ever miss the money, you’ll be fine and recommend not selling, as you mention it is a store of value.

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