29 January 2014

The story behind JPM's 10 tonne gold withdrawals

What is JPM up to? A detailed look at the movements in an out of their eligible stock indicates they, or a client, is stockpiling/parking kilobars in a Comex warehouse for later withdrawal, possibly to do with Chinese new year.

Back in October, TF Metals Report noticed some "round number" Comex movements in multiple of exactly one tonne. At the time I noted that 3 kilo bars are acceptable for delivery against a Comex contract and speculated that:

"if we see 99.5 bars going into COMEX then it may be an indicator that Asian demand has eased. Maybe JPM had commitments with refiners to buy their output for a period of time, and if Asian demand had eased then they may have just asked their refineries to make 99.5 (for all we know maybe those deliveries were 99.99 kilo bars) and they are just parking them in their COMEX warehouse, waiting for Asian demand to return ... if there are movements of round ounce tonne lots, indicative of kilo bars, out of the warehouses then it may be an advance bullish signal of Asian demand returning."

Given these two large recent withdrawals, I decided to have a look at all tonne type movements in and out of JPMs eligible stock over the past two years. The first list shows the recent movements, which started in October with eight receipts totalling 20 tonnes. Coincidence that exactly 20 tonnes is then withdrawn a few days before Chinese new year on the 31st? I don't think so.

18 Oct 13 Received 6 tonnes
21 Oct 13 Received 3 tonnes
23 Oct 13 Received 1 tonne
11 Dec 13 Received 2 tonnes
12 Dec 13 Received 2 tonnes
13 Dec 13 Received 2 tonnes
16 Dec 13 Received 2 tonnes
17 Dec 13 Received 2 tonnes
24 Jan 14 Withdrawn 10 tonnes
28 Jan 14 Withdrawn 10 tonnes

The other explanation to my initial one is that JPM contracted to sell 20 tonnes to an Asian client way back in October, hedged that on Comex and then accumulated kilobars over the next 4 months from refineries. That is, the 20 tonnes that was being accumulated was already spoken for. Either way, the two 10 tonnes withdrawals do not look like they were unplanned or unexpected by JPM.

This isn't the first time JPM has done this. Consider this sequence of movements towards the end of 2012 - accumulating 18 tonnes, then 17 tonnes withdrawn:

27 Aug 12 Received 6 tonnes
19 Sep 12 Received 6 tonnes
09 Oct 12 Received 6 tonnes
13 Dec 12 Withdrawn 10 tonnes
18 Dec 12 Withdrawn 2 tonnes
26 Feb 13 Withdrawn 5 tonnes

Chinese new year in 2013 was 10 February, so the pattern is not as strong as 2013, but I would note that the 12 tonnes accumulated in September and October exactly equal the 12 tonnes taken out in December.

Here are some other tonne lot movements back to the beginning of 2012, which is as far back as I went in this quick analysis and that don't seem to be related, just for completeness.

06 Feb 12 Withdrawn 5 tonnes
09 Apr 12 Withdrawn 5 tonnes
12 Apr 12 Withdrawn 5 tonnes
20 Apr 12 Withdrawn 3 tonnes
29 Jun 12 Received 1 tonnes
02 Jul 12 Received 2 tonnes
07 Aug 12 Received 5 tonnes

It is clear from the above that tonne lot movements in Comex warehouses are certainly not unique - a quarter of all JPM eligible movements are in tonne lots over the past couple of years. Seems they use Comex for holding kilobar inventory on a semi-regular basis.


  1. Just a followup, usually we don't get visibility of the day to day non-manpulative activities of bullion banks but in this case the exact tonne lot numbers are like a marker, sort of like when doctors put dye into you to see what is going on inside your body.

    I would also note that some kilobar movements may be "hidden" in that they occur with 100oz odd weight bar movements and this shows up as a fractional decimal figure.

  2. Interesting stuff.

    On December, JPM demanded delivery of over 6000 contracts to their house account. Isn't there a position limit of 3000 contracts per month in Comex?

  3. If you boil this down to what was actually pertinent to your thesis, JPM took a large accumulation of gold (20 tonnes) from the Comex and delivered it to an Asian buyer.

    Is this not the case? The piece about TF, while correct, was superfluous.

    So Bron, what you are hypothesizing, since you really do not know where the gold went, is that gold is flowing from West to East.

    Welcome aboard.

  4. While reading Bron's Post and without having read Jesse's comment above, I came to the same conclusion: "Gold is moving from west to east". Thus, your post totally misses the most important point. Also, the title of the post leads the reader to believe that you are going to post about "what's behind the gold withdrawals"

    Even Harvey Organ can see that these withdrawals are kilo-bars. I thought you were going to actually admit what these withdrawals really mean. Chinese New Year? Really? These withdrawals have been seen as a steady decline ever since Venezuela asked to repatriate their gold. GLD, alone, has lost 41% of its gold since.

    But alas and alak, you again prove your shillishness.

    The entire point of the many, observers, including myself, who are watching the incredible depletion rate of GLD and comex gold, is that it's moving RAPIDLY to the east.

    If GLD was simply selling gold as a result of a "NORMAL UNMANIPULATED PRICE CORRECTION", where it was clear the gold removed was being sold "here", and therefore moved from "West to West", I think us "naive goldbugs" would conclude that at some point in the future, the gold would be observed to be again accumulated by the ETF.

    But---you see Bron, The Gold Is Moving East To China---It'll never be seen again.

    Thus, any strain on inventory caused by larger than normal demand on either or both of the GLD/Comex gold will eventually destroy confidence that physical delivery can be accomplished.

    So--I ask you---What do you think will happen when demand increases while gold prices move higher?---Do you think the gold inventories seen just a few months ago will be seen again?

    DON'T ANSWER---because I don't want to read your answer. It'll be filled with shillishness.---I'LL ANSWER: Once gold prices move higher as a result of, or in conjunction with, decreasing supply to deliver, we will see price acceleration Bron.

    Subsequently, a new gold price bottom will have been established as a result of supply constraints.

    I don't know where that higher bottom will materialize, but because we will never see our western gold, that has been moved east, within our life times, there is no way, that I can think of, we will ever see prices as low as we are seeing today.

  5. A couple questions come to mind. The theory is plausible enough but I need to understand how gold specifications work on the comex. If JPM started buying in October can the buyer of a contract "spec" a 1kilo bar for delivery? JPM stopped deliveries the latter part of the year to accumulate. Did the other Comex vaults just happen to have 1 kilo bars to sell to JPM? Was JPM sitting on 1 kilo bars in that amount and just bought 400oz good delivery bars to even it up for the planned withdrawl? Something doesn't feel right.

  6. Jesse/Jake,

    "Welcome aboard"? Um, Perth Mint sells 5 to 6 tonnes a week of kilobars to Asia. I'll just take it that you are new around here and haven't read all of my posts so seem to have some preconceived views about where I stand.

    I didn't think my post was negative on gold, but it seems one is shill these days if one does NOT include some pro-gold bullish statement in every post.

  7. Anon,

    Note that these movements are in and out of eligible, not registered, which is where any deliveries to JPM would show up.

    My understanding is that you cannot specify the type of bars.

    Given that this gold came into eligible and then back out leads me to think that JPM or a client was just using Comex warehouse as an accumulation point and possible they may not have even used Comex futures at all, although I think it is more likely they went short when they acquired the kilobars and then closed out (ie no deliveries against contracts, just cash settlement) when they sold the kilobars.

  8. something I don't understand, said by many, and again here (by Jake).

    Folks say that gold going into China "will never be seen again" etc, or "gold does not send its gold overseaa', and many other similar shallow statements.

    I have always wondered where the gold inside my chinese 1oz panda coins came from. My understanding was that it came from China. But the self-apppointed expert bloggers would have me believe that this CANNOT be, because after all "no gold leaves China..."

    Answer if you can, while maintaining the fiction that "no gold leaves China..."; "it'll never be seen again..." etc

  9. Yes the Pandas do come out of China, but the volumes of that are very small compared to what they bring in, so while "gold never leaves China" is not strictly correct, is is pretty much true.

    Although I'm not sure why you think I need to "maintain the fiction", where have I said that gold never goes out of China?

  10. @Anonymous, the long is obligated to take what the short delivers. It is highly unlikely that the short would deliver kilobars (added cost vs comex bars). Hence Brons point is well made. These kilo bars likely never even belonged to JPMorgan.

  11. mikeyj80,

    Thanks. I would note that 99.5% purity kilobars would not have any more different cost to a 100oz bar and there is a market for 99.5% kilobars in the East.

    Perth Mint has seen a good bid on 9950 kilobars from Turkey recently, so maybe that is where the 20t went.

  12. Thanks Bron, it was my assumption that these were in fact heading to asia and would be min 999

  13. @OneEyedBug. The position limit is for an unhedged position on the exchange. JP as a dealer likely has cash/physical contracts on their book at all times. If they are net short the physical, they can request an exemption from the CME to be longer than the position limit provided they can show within reason that the comex futures are intended to backstop their cash sales (i.e. instead of buying from a refiner, they are buying paper to hold and convert to physical.

    Alternatively, once they stopped some receipts they could get long up to the position limit again. It is my opinion that the mechanics were probably the former rather than the latter, but that is without doing any homework.

    Hey, you get what you pay for!

  14. Jesse, in reality JPMorgan did not take anything from the comex, this gold, in my opinion, was never meant to be part of the game in the first place. I posted similarly in the forums at silverdoctors in more detail and likely will take a similar licking as what you would like to give Bron.

    Bron hit it above, this gold never went to 'registered' meaning it was never intended to be delivered. It is my assumption these were higher purity than comex destined for asia, but that is a guess only, but would be one more reason why they never were intended for comex.

    The other interesting piece is the rule that makes the kilobars eligible... 1x100oz bar or 3 kilobars... if that rule didn't exist we wouldn't be having this conversation because we never would have seen the movements on paper! It makes you scratch your head about any larger london bars that may be in these same warehouses and how they flow and title changes... all in the comfort of an opaque peer to peer mkt of 'the big boys' Be careful what you all wish for!

  15. Bron,

    I was not referring to you regarding "maintain the fiction". Bloggers in general. I know the amount is minimal, but this is just another example of folks burying the truth. When presented with facts, they then say, "OK, so gold does leave China, but..." But if no-one ever confronts these false statements, these folks will repeat them over & over to anyone who will listen.

    eg. Paper leverage = 100-1. They will repeat this ad-nauseum until someone confronts them. Then they slink off to another blog to parrot the same lie.

    Personally, I've always found teh truth to be quite refreshing, and that's why your blog is great.

  16. mikeyj80,

    Good point about the 400oz bars. There could be 400oz bars in NY warehouses but that is not reported on Comex stocks for that warehouse because it does not meet the specification.

    Note that refiners constantly produce gold because mines contstantly mine it. So there is a realtively consisten flow that they have to get rid off. If demand is weak for a short period, someone like a JPM may take up that refiners output at cheap premium and ask for it in kilobars which they store in their NY warehouse (say because the refiner was in Canada or US, so that is closest vault). They pick up a few tonnes here and there, waiting for good premiums over East to sell it into.

    Because they have to report any metal in the warehouse that is in eligible form, those kilobars show up in the reported stocks but as you say, were never going to be "available" to the market.

  17. OK, so the 20TO for China didn´t come from JPM stopping deliveries in the Comex.

    JPM House account stopped in Dec 2013 YTD 6254 contracts (625400). This have to go through registered stock, not eligible. Although I am aware (thanks KD) that we cannot compare deliveries and warehouse situations, due to the broad settlement “possibilities”, looking at the registered stock now for JPM (87.000oz) the divergences are obvious.

    For me the summarized conclusion is: the futures Comex market could not serve the physical needs of China. It is just a paper game with a barely 1% physical credibility touch.


  18. Unai,
    You comment assumes that all of JPM ownership would be in their own warehpuse. JPM can own gold in the other players warehouses.

    Since you are correct on their stopping in Dec there are 2 options i see, they still own gold in other parties warehouses or they have sold the title of that gold to someone else.

    Did you notice they became an issuer in the Jan contract (small potatoes in comparison)

  19. mikeyj80,

    Thanks, you are right, another variable to ponder.

    I made the following recap in my head, I am trying to do what KD says we never should: reconcile deliveries and warehouse.

    JPM House account stopped in Dec 2013 6254 contracts, 625,400oz. And it should have been initially in registered form, with a warrant attached. Because a BBank can only “settle” from registered. This month JPM House so far only issued 98 net contracts, 9,800oz.

    Current JPM House registered stock=87,000oz aprox. So for the huge remaining registered stock:

    1) It is in other non JPM warehouses. Probably outside the Comex because other Comex agents House registered stock is low.
    2) They have sold the title to someone else, they have done an EFP etc… Outside the Comex too, otherwise the stopper would have appeared in the report.

    But why use registered stock for transfers outside the Comex? It is already registered and you paid for the expenses and process in order to be so. Why not use eligible?
    Because the eligible JPM House stock is not JPM’s? Why is not Customer stock then? I thought only some House account trades can be related to customer activity, via swaps and other structured trades but not a 47% of it delivered so far in Kg bars.

    About this 20T eligible delivered, you say it did not come from Comex futures. How do we know it was not stopped registered gold converted to eligible? When eligible stock is added, is there a way to know whether it came from futures or from outside?

  20. The bottom line is that China has been importing 100+ tons a month for quite some time now. Anyone whos buying at that pace obviously has no intent on ever letting go of it. The fact is still that the US has been exporting gold on a net basis for the last 20 years to the extent that US gold reserves are no longer the largest of the world anymore by far. Once this ugly fact becomes known as the truth I believe that is when we will see the US dollar lose its reserve currency status. "he who holds the gold makes the rules" China already owns our debt and now it is seeming to be that they now also hold our gold and in turn will most likely eventually "make the rules" The entire metals market is only aprox a $200 billion market in total which only represents 1% of the true wealth in the world. That's the reason why JPM is able to influence (manipulate) prices as they see fit to do. As the floor in the equities markets begins (continues) to fall out, that is when we will see $$$ start to flow back into precious metals again. Especially with all the attention the metals have received in the past few years. So if we only see a small fraction of that $$$ in metals and the number is now 2% of true wealth then the entire precious metals market will double in size and in turn in price values as well. So really who cares what JPM does. The precious metals are right now probably the best investment we will ever see. Especially since we are still printing money at a ridiculous pace and devaluing the USD into the abyss. The writing is on the wall people....if you want to survive the inevitable future and have any type of wealth in it, then you need to own as much physical gold and especially silver as you possibly can and...LEARN TO SPEAK CHINESE!!!!!


  21. First time visitor Bron... now on my daily read list!

    Like the nice balance you have with the rabid detractors... a calm explanation of your position while demonstrating your respect for even the most rabid view...

  22. @Unai, i agree, makes little sense to move registered outside of comex if you think you may want to use it on the comex again.

    As far as knowing these weren't sourced via delivery, we saw them enter the game as eligible stocks wihtout a corresponding drop in registered stocks. Not a perfect trace if there was a day lag in reporting, etc, but the numbers were so perfect it grabbed everyones attention.

    We never saw the eligible move to registered, so the logical conclusion is tha JP or a client of JP just parked the gold in the warehouse. Due to the rule allowing kilobars to be eligible for delivery, JP is obligated to report the inventory to the CME.

  23. Im just trying to understand all of this. Is it US treasuries that China holds? And is it possible that China has not dumped our US treasuries ...perhaps because our banks have agreed to sell them our gold at suppressed prices?

  24. To Ponyboy...
    Well put. I couldn't have said it better myself. Stay Golden Ponyboy!! LOL

    -J.R. Butler