The ‘Big Long’ Gets Bigger As Goldman And HSBC Gobble Up Tons More Gold

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Summary

Goldman Sachs and HSBC buy up a couple more metric tons of gold – now 9.23 tons and counting.

The Volcker rule does not, and never will, prohibit banks from engaging in proprietary trading in physical gold, silver, or platinum bullion.

The Volcker rule won’t go into effect against big-bank-owned hedge funds until June 2017.

When bank-funded and -controlled hedge and private equity funds are finally subject to Volcker’s rule, it should result in significant upward pressure on the price of bank metals.

What happens next is that the price of bank metals will rise considerably, even in the absence of a collapse of the worldwide bond bubble.

The Big Long was big already. It just got bigger. In the previous article, I noted that Goldman Sachs (NYSE:GS) and HSBC (NYSE:HSBC), had taken delivery of a staggering 7.1 metric tons of physical gold in August, 2015. Since then, they’ve gobbled up tons more.

As of Wednesday, Goldman Sachs bought 142,100 troy ounces (4t 419.8040 kg.) worth of physical gold bars into its proprietary trading account at CME, Inc. HSBC bought a total of 154,800 troy ounces (4t 814.8181 kg.). The two banks have now scooped up approximately 9.23 tons worth of hard metal.

These physical gold bars are headed into the banks’ own vault. That’s what the banks say. They are being purchased as a proprietary trade. That’s what the COMEX exchange says. We know this because commodities regulations require that clearing firms declare the intended ownership of such deliveries.

To better understand what I am talking about, let me explain a few things about how clearing houses work. All clearing brokers who are active at any CME, Inc. exchange, including COMEX, have both a house and a customer account registered with the exchange. The “house account” is the “clearing firm’s proprietary, non segregated trading account.”

You read that correctly. The words are “PROPRIETARY TRADING”! No, they are not my words, but the words…

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The ‘Big Long’ – Goldman Sachs And HSBC Buy 7.1 Tons Of Physical Gold

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Summary

On August 6, 2015, Goldman Sachs, which has issued very bearish forecasts on long-term gold prices, took delivery of a 3.2-ton purchase of physical gold.

On August 6, 2015, HSBC which also claims to be bearish, took delivery of a 3.9-ton purchase of physical gold.

In both cases, the purchases are registered as being for the benefit of the bank’s own house account, rather than the accounts of customers.

Investors should do as the banks do, not as they say.

On August 6, 2015, Goldman Sachs (NYSE:GS) and HSBC (NYSE:HSBC) took delivery of a sum total of 7.1 tons of physical gold. No, I have not made any typographical errors. And no, I am not talking about electronic paper claims. I am talking about shiny yellow metal stuff that you can touch and feel.

The gold bars were not purchased for bank clients. They were purchased for the banks themselves. How do I know this? They are designated by the exchange as being for delivery to the bank’s “house” accounts at COMEX, not to client accounts.

Goldman Sachs, alone, took 3.2 tons worth of physical gold bars. Yet, even as the firm builds its stockpile, Goldman tells clients not to do it. According to Goldman’s Jeffrey Currie, the long-term outlook for gold is bleak.

“In longer term, we definitely like playing this market on the short side. We think we are in a structural bear market, not only in gold, but across the commodity complex, as the individual commodity stories are reinforcing to one another, creating a negative feedback loop.”

In spite of the antics in the paper-gold market, we know the physical market is on fire. Demand will exceed known supplies by at least 1,350 tons in 2015. More in 2016. But, that won’t stop someone from setting up the paper market in order to buy from the physical market very cheaply. This is because the mysterious gold “supplier of last resort” will fill COMEX physical delivery demand, for the moment at least, no matter how high it rises, and no matter how low other supplies may be.

According to HSBC strategists, there has been a…

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U.S. Federal Government Was Covertly Emptying Gold Reserves To Hold Down Gold Prices

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Summary

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.

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