On June 1, 2015, JP Morgan added almost exactly enough ounces of physical gold to patch the deficiency between supply and delivery demand at COMEX, avoiding widespread dealer default.
Declassified documents, along with strong circumstantial evidence indicate that it was not JP Morgan, but its most important customer, the US Federal Reserve, that just bailed out COMEX.
The deficit in world physical gold supply will be at least 606.1 tons in 2015, but may be much larger, and similar incidents are likely in the future.
The deficit in world gold supply versus demand will grow much larger in 2016 and beyond.
Even if the entire remaining US gold reserves were mobilized, prices could not be permanently held down to current levels, making gold and gold mining stocks a good deal now.
In an article dated June 1, 2015, I pointed out that COMEX clearing members had gotten themselves to the edge of a widespread default on physical gold delivery obligations. They faced net claims of 550,000 troy ounces against only 370,000 registered ounces left at the COMEX warehouses. That left a deficiency of 170,000 ounces, or 5.29 tons of gold.
That same day, JPMorgan Chase (NYSE:JPM) transferred 177,402 troy ounces of gold into COMEX registered gold stockpiles – just enough to cover the shortfall at maturity, plus some extra to cover the additional buying that always happens during an average delivery month. All this raises a question: Did JPMorgan Chase just engage in a bailout similar to John Pierpont Morgan’s 1907 bailout of the New York City banks?
At first glance, it may appear as if JPM bailed out other COMEX clearing members. If you look closer, however, you see something else. The June 2, 2015 delivery report shows that the gold that saved COMEX came from JPMorgan’s house account. Then, after replenishing COMEX registered gold supplies, it delivered 246,800 troy ounces of bank-owned gold, representing 2,468 matured short contracts, as JPMorgan customers purchased and took delivery of 42,200 troy ounces.