Ted Butler on JPMorgan cornering the gold futures market

http://www.butlerresearch.com/

I know that it may seem that I have been making a big deal out of JPMorgan’s newly acquired massive net long position in COMEX gold, but in truth, there is nothing more important. Let me rephrase that – nothing even comes close to being as important than the concentrated long position that JPMorgan holds in COMEX gold futures. Others can persist in trying to divine the undocumented statistics and pronouncements from the LBMA, or in what central banks may or may not be doing; I wish them well. For me, I’m sticking to the hard data that can be verified.

What that hard data tell me is that JPMorgan has, effectively, cornered the gold market. Think I’m exaggerating? This week’s COT report indicates that the 4 biggest longs hold 140,550 contracts. That is a very  hard number derived by multiplying total COMEX gold open interest of 397,035 contracts by the percent of 35.4% held by the 4 largest traders on a net basis from either the futures only disaggregated or legacy long form reports. (The CFTC doesn’t give you the concentrated figures in contract terms; you must do some minor calculations to get them). Of the 140,550 contracts held net long by the 4 largest traders, I am calculating that JPMorgan holds 85,000 contracts based upon previous COT and Bank Participation Report data. Please stick with me a minute while I go over some basic numbers.

By subtracting the total number of spread contracts listed in the disaggregated COT report of 60,802 contracts from the total open interest of 397,035 on the cut-off date, there remains a true net total open interest of 336,233 contracts in COMEX gold futures. Dividing those 336,233 contracts into the 85,000 contracts that JPMorgan holds, the resultant percentage is 25.3%. In simple terms, JPMorgan holds more than 25% of the entire COMEX gold futures market on a true net basis. There has never been a more concentrated net long position in any major regulated futures market in history. Not even the Hunt Brothers in COMEX silver in 1980 or the Sumitomo copper trader, both found to have manipulated markets by means of a corner, held as much a share of the market as JPMorgan holds now in COMEX gold futures. Here’s very recent account of the Sumitomo copper manipulation, by a trader named “Mr. 5%’’http://au.finance.yahoo.com/news/copper-king-empire-built-manipulation-154800854.html Keep in mind, that JPMorgan’s concentration in COMEX gold futures is five times the copper manipulation level. If a 25% net share of a market does not represent a corner, then that term has no meaning. I’m not alleging that JPMorgan owns 25% of all the gold in the world, as that would be impossible. Heretofore, I would have insisted that owning 25% of the COMEX gold market was impossible, but no longer. - Ted Butler