JP Morgan surprised their gold price manipulation no longer effective in forcing prices down

In last weeks publication of Flow’s & Liquidity, JP Morgan noted that the rise in gold prices appeared to be tied to numerous hedge funds that were dissolving their GLD ETF holdings to go long in OTC derivatives as gold prices begin to rise due to higher demand.  These actions have led the bank to desperately seek physical gold for delivery from multiple sources such as HSBC and Scotia Mocatta, and are revealing the end game consequences of their years of forcing down paper gold prices in the market.

Chart courtesy of Zerohedge

SEC filings showed that the largest hedge fund holders of the gold ETFs liquidated most of their positions in Q2, although the single largest holder commented that they had simply switched their exposure from ETFs to the OTC derivative market as the current downward sloping forward curve makes it cheaper to be long gold through futures than via the ETF.

… a backwardated (downward sloping) gold forward curve is very unusual. This is an indicator of how strong physical demand is, i.e. spot is bid up relative to forward prices due to strong demand for immediate delivery of gold. – Flow’s and Liquidity via Zerohedge

JP Morgan, which is a shareholder and partner in the Federal Reserve, has been using the GLD ETF and paper spot price to drive down gold for a number of years.  The primary purpose of these actions is to mask the dollars insolvency, and keep the actual price of gold from exploding as the central bank runs its quantitative easing and money printing programs.

However, as the price has been pushed down, more and more investors, central banks, and even nations like India and China have increased their buying and demand of physical gold instead of simply rolling over their paper contracts in the futures market.  These deliveries, along with the major market bombshells earlier this year with Holland’s ABN AMRO and Germany’s demand for a return of their gold reserves, have broken wide open the paper market manipulation, and are putting JP Morgan in a bind to come up with gold they do not have.

Like the Fed’s going all in with Quantitative easing, JP Morgan is believed to have been naked shorting both gold and silver to numbers reaching as high as 100 times the amount of physical metal stored in their vaults.  This revelation came from whistle-blower Andrew Maguire, who after his testimony with the CFTC, was almost killed in a car crash by an assailant who tried to escape the crash scene, and was eventually apprehended by police in a high speed chase.

On March 23, 2010, GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Maguire is a metals trader in London. He has been told first-hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.

In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events. –Gata

 The credit crisis of 2008 had many signals to both regulators, and the investing public, of the insolvency that lay ready to explode upon the financial world, and the subsequent crash that was soon to come.  And just as the stock markets have rebounded in the past five years to new all-time highs, the growing belief is that the bubbles created by the Fed, and the manipulation of gold and silver prices by banks such as JP Morgan, have put the economy once again on the precipice of collapse, only this time, there will not be a taxpayer bailout coming to stop the system from going into cardiac arrest.

And as JP Morgan desperately seeks any bank vault holding gold to help cover their dwindling supplies, forces outside their control are leaving the paper market in droves and seeking protection in the physical metal, which appears ready to blast off in price, and sink the banks that have manipulated it.