No, JP Morgan Is Not Buying Silver Eagles

JP Morgan Chase

(by Bron Suchecki)

I was joking earlier this month when I said “350 million ounces looks like an understatement” with regard to Ted Butler’s theory that JP Morgan is accumulating physical silver. Last week Ted claimed that “the real amount may be in excess of 500 million ounces” but that he uses the 350 million ounce figure because he is worried “heads might explode if the number is closer to half a billion ounces” and he is “not looking for anyone to lose their minds”.

He also ups his belief of how many coins JP Morgan has bought, from 70 million to over 100 million. I didn’t deal with the coin buying claim in my last post, focusing instead on the divergent sales theory behind the 350moz claim, but here I want to address the coin side of the argument.

Ted’s theory is that JP Morgan “is exploiting a loophole in the law that requires the Mint to produce to whatever the demand might be” by manipulating the silver price down then requesting “the US Mint sell it all the Silver Eagles it can produce”. He says that JP Morgan “doesn’t care if it is paying $2 over the spot price, JPM wants all the silver it can get its hands on”. Ted then claims that JP Morgan has those coins melted down into 1,000 ounces bars and as “the coins are the same purity as 1,000 ounces bars, melting is a simple and a low cost process”.

My first response to this is why would JP Morgan buy coins when it can buy silver from anyone in the value chain before the US Mint? There are many businesses involved in getting coins produced, with value being added at each point:

Miner -> Refiner -> Blank Manufacturer -> US Mint -> Distributor -> Retail Investor

Given JP Morgan’s (along with HSBC’s) dominant market share in the precious metal markets, they have trading contacts with many miners, all of the key refineries, as well as blank manufacturers for the US Mint (one of which is The Perth Mint). Why pay the US Mint $2 an ounce when you can offer anyone else in the value chain before it gets to the US Mint much less than that? If they offered to pay, say, a $1 premium to silver producers they probably have every single one of them beating their doors down. Refinery margins are so thin you wouldn’t have to offer much to them to guarantee supply.

As to the “loophole”, while the US Mint has a requirement to meet demand that does not extend to its blank suppliers and nor to refiners or miners further back in the chain. Indeed, the US Mint has had periods where it has not been able to get enough blanks and has had to stop Eagle sales in the past, proof that its suppliers have no obligation to supply them. Ted also claims that JP Morgan buys Silver Maples but the Royal Canadian Mint has no such obligation to sell.

So there is no impediment to JP Morgan simply poaching all the silver supply that flows through the production chain that goes to the US Mint. If JP Morgan is indeed keen for physical silver, it makes no commercial sense to buy coins when they can acquire it much more cheaply from others.

Some may make the argument that these other suppliers would not sell at the manipulated and artificially low silver prices when JP Morgan wants to buy. The fact is, however, that the refiners and blank manufacturers take no price position with their silver and are hedged, so they do not care what the price is when a JP Morgan asks to buy silver – their business model is based on premiums above metal price less cost of manufacture, not on the metal price itself.

Miners you may expect would be more careful when they sold, but the fact is that most are price takers and have to sell as they produce as they need the cash to pay their bills. Miners may withhold a few days production but most cannot finance such long positions for long once the metal is out of the ground. The Perth Mint’s experience, as I’m sure is that of the other key LBMA refineries, is that mine supply into a refinery is fairly consistent. The evidence from the London Auctions is that miners are price takers.

Silver Ealge Moster Boxes

(A pallet of Monster Boxes containing 500 Silver Eagles each.  photo courtesy of West Point Mint)

Also, it would not be as cheap as Ted thinks for JP Morgan to have bought massive numbers of monster boxes (100moz = 200,000 boxes!) which would then need to be unpacked (and boxes disposed of) and the coins melted down by refineries. Nor would it be able to be done without one word leaking out to the wider professional market about what JP Morgan are up to and them then being front run by their bullion bank competitors. We have not heard one word of this massive logistic and operational exercise – it would be impossible for it to be completely hidden given all the staff involved at US Mint distributors, secure carrier firms and the refineries themselves.

Finally, do you think that a refinery getting thousands of monster boxes would not think it a bit unusual for them to be supplying blank manufacturers with silver which is then coined and then returns back to the same refinery for melting, and it would not prompt them to suggest to JP Morgan that it would be a lot less work and cost to JP Morgan to just buy the silver from them in the first place?

In addition, as to the Maple leaf buying, since the Royal Canadian Mint is a combined refiner, blanker and mint (like The Perth Mint) and the only refinery in Canada with the scale to melt down coins in such volume, is Ted saying that JP Morgan buys coins from the Mint then asks them to melt them back down? Wouldn’t the Mint just see the advantage to themselves to suggest they supply JP Morgan with 1000oz silver bars at a premium? Or is Ted suggesting that JP Morgan buys Maples and then ships them to Salt Lake City to the ex-JM refinery in the US or elsewhere at more cost just to have them melted down, and buys Eagles in the US and ships them to Canada (the nearest non-US refinery of scale) to be melted? If so, to what purpose? To hide their strategy from the Royal Canadian Mint and US Mint?

The whole theory is nonsense. I’ll leave it up to you to read my theory and Ted’s and make up your mind as to who exactly has “lost their mind”.

——————-

The article was written by Bron Suchecki of the Perth Mint.  The original article can be found here:  No, JP Morgan is not buying Silver Eagles.

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25 Comments on "No, JP Morgan Is Not Buying Silver Eagles"

  1. Great points.

    However, if he was correct, that would give the 2015 Eagle a hell of a numismatic value in the future if they were all melted down.

    Thanks again for all your articles Rocco…keep em comin’!

    • Jacob T,

      Glad you enjoyed the article. Just to make sure we give credit where credit is due… BRON SUCHECKI of the Perth Mint wrote that article. It was a guest post. I enjoy his work.

      steve

      • Hey Steve,

        good info…always glad to know what’s happening in the PM’s world…however, I thought I’d offer why the governments and CB’s are creating all the debt that is driving the PM valuations (and manipulations thereof)…

        In 2008, the 25-54 yr/old segment of the US population began outright shrinking…the market implications were decidedly not good. As Bush said in Dec. ’08, “free market principles were abandoned to save the free market”. In the next year or two, the 25-64 yr/old population segment will likewise begin shrinking and do so for 5 to 8 years. And this is happening across almost all advanced economies.

        The Fed and CB’s are simply running a con game to avoid outright panic of the masses and meanwhile stuffing the pockets of the greatest among us at the expense of the vast majority…this was a system premised on ever more population, consumption, investors. The entire premise was always in trouble but now it is totally broken. We are presetly in the full on Wile E Coyote moment.

        Economists and Fed chiefs enjoy explaining the growth of the US population as a part and parcel of the US “exceptionalism” meme. But the truth of our economic troubles (and OECD nations alike) lies in slowing population growth and the components of that slowdown. The core populations are shrinking…the old are swelling…the young are barely growing.

        http://econimica.blogspot.com/2015/05/the-truth-of-great-financial-crisisand.html

        When you have demographics against you, interest rates at zero, record debt to GDP, and you are likely beginning a recession while in the midst of the greatest asset bubble of all time…below are some things to consider while Wall St. and the Fed tell you all is well!?!

        http://econimica.blogspot.com/2015/05/reality-check.html

  2. i love the increased sniping in the gold/silver evangelist community. I think it’s healthy. Unfortunately, it’s also probably a symptom of a community that has been so wrong for so long they have run out of other things to write.

    • Cam,

      Actually I agree with you on your first point. However, you second point needs qualifying. As I mentioned in a recent interview, my wife and I sold our business and left the big city for a small ranching community out west in the beginning of 2007. I knew what was coming. And indeed, the entire U.S. Investment Banking System disintegrated as the country was thrown into a severe recession due to the housing bubble.

      Well, I wasn’t surprised, but it was quite shocking to see that the financial system almost collapsed when Bear Stearns, Lehman Brothers and Merrill Lynch went belly up. Now, what I and most of the folks in the precious metal community didn’t count on is the LONGEVITY of the propping up of the system by the Fed and Central Banks. So, yes… we got that wrong.

      However, the GAME CH-AIN’T over yet. While we may have be wrong on the TIMING, we will not be WRONG on the outcome. Americans have invested their wealth in the GREATEST PAPER PONZI SCHEME in history. This will not take decades to unfold, but rather years.

      So… I’d rather be a bit EARLY, then ONE DAY LATE.

      ADDITIONAL NOTE: Nearly half of my traffic each day comes from unique visitors (NEW EYEBALLS). So, my motivation is not to preach to the folks who know this stuff, or those who are disillusioned, but rather to folks who are finally WAKING UP. And there are a lot of them. Some of my popular articles receive 20-40,000 reads. If you consider half are NEW EYEBALLS, that’s a game changing event when gold and silver are revalued.

      steve

      • I definitely was not awake & aware in 2007.

        Your statements like ” Americans have invested their wealth in the GREATEST PAPER PONZI SCHEME in history” is a shock to many. Some probably recoil from harsh predictions, and they may tune you out. But some won’t awaken without stark pronouncements that challenge their faith in fiat currencies, investments in those currencies, and those that control them.

      • The so called housing bubble was not the cause of the recession, it was the effect. The banks were getting scared of all the credit card debt and lines of credit on housing. One of them started pulling and lowering credit card limits. The rest of the big banks followed suit so as to not to be the last man standing. This in effect stopped the movement of
        money. Stopping the movement of money in a consumer based economy is a kiss of death. No money movement causes loss of jobs, ergo people could not pay their mortgages. We see this still going on, lower paying jobs, high unemployment (Cooked Books by the Government not showing the real story) Massive amounts of money available to Banks and no movement of money in the population at large. Hang onto your hats as the greedy banks are not investing in long term economic growth, just short term paper growth. The bubble is going to burst again.

      • Steve,

        Is this guy full of shit or is there a disinformation campaign going on;

        New World Currency Backed By Gold or Silver?
        Thursday May 21, 2015 15:50

        History has proven that 100% of fiat currencies have failed the test of time. The average life span of a fiat currency is 40-50 years. With the US dollar now in it’s 44th year it makes you wonder if the end of the greenback is near……………

        …….Something big is going to be happening with silver I feel. After a 16 month period of “dormancy” from the silver giant JP Morgan have returned with a vengeance to take delivery of record amounts of physical silver in the Comex vaults yet again.

        In the first two weeks, April of 2015 alone JP Morgan purchased a whopping 8,300,000 ounces of silver.

        JP Morgan currently holds over 55,690,000 ounces of silver and that number continues to grow.

        What does this mean? No one knows for sure, but my guess it’s going to support something new, big and important down the road and I think riding their coat tails it not a bad idea.

        Chris Vermeulen
        Protect And Grow Your Portfolio: http://www.TheGoldAndOilGuy.com

        Thanks,

        SteveW

  3. The article makes perfect ‘common’ sense. Lets face it. It’s all about the bottom line.Profit and loss. And I’m VERY sure that JPM is NOT interested in the loss, but most of all, in the profit.

    Look again at the photo of monster boxes in the article. There are 41 monster boxes on that pallet, at 500 coins per box. That’s 20,500 one ounce silver eagles in that pile. Now to acquire, ship, process and account for even a quarter of a million silver eagles, would be an expensive, logistical nightmare. Something that large would not be kept secret. Word would leak out.

    • Good point, that picture puts it into perspective – 100 million coins is only 5,000 pallets! If you just copy and pasted that picture 5,000 times into a blog post – like you were taking virtual delivery – taking 5 seconds each time, it would take 7 hours.

  4. Let’s just suppose for a minute in regards to what Hugo Salinas-Price has stated in his interview with Greg Hunter the other day. HSP stated that he is working on monetizing silver of sorts where a central bank or a treasury could set the price of silver on floating basis so that those who own physical silver could exchange it into cash (and vice versa) at any time at any bank. If such legislation ever came to pass and if one could dream further into speculating that the government could impose only the officially minted silver coins are to be used in such exchanges (may further impose certain percentage of premium for non-government silver which will be another form of tax to make more money off its citizens), it may not be so far fetched to think that some entity of means and power may in fact be actively loading up on treasury silver coins. Thus there might be a possibility, albeit infinitesimally small, that this could be why JPM is buying silver eagles but definitely not melting them down.

    • “….where a central bank or a treasury could set the price of silver on floating basis….”

      He specifically said only a nation’s treasury, like the U.S. Treasury Dept. and NOT the central bank, like the Fed Reserve, as it is not a government agency, and serves banking & oligarchs’ interests.

      However silver is a competing form of money to nations’ fiat currencies. I don’t see sovereign nations and their treasuries legitimizing silver by making a silver coin for circulation.

      • Who’s to say Bix weir ain’t right, and the treasury takes the reigns back from these rotten freaks.

        • The Fed [bankers] have their tentacles wrapped around everything financial in the country, like the creatures in the “Alien” movies. Killing the parasite kills the host now unfortunately.

        • Do you really believe that the Treasury is gonna change things with the Banksters , when the U. S. Regulatory Agencies and the Treasury are all of the same ” Tribe ” as the Banksters ?

          http://www.tomatobubble.com/id199.html

          America is an occupied country !

    • I think you make a very valid point. ABSOLUTELY ANYTHING is possible with these thieves. Just look how long they’ve prolonged this mess already, and the leviathan still lives. Unbelievable !

  5. silverfreaky | May 21, 2015 at 6:12 am | Reply

    We had one high in1980 and one in 2011.The next one may arrive in 2042.
    So sit in your rocket chair smoke some pipes and hope that you are still alive when the next pump and dumb arrives.
    Otherwise you leave it to your relatives.

    • What do both of those dates have in common? Crisis and lack of confidence in the system. I don’t think that we will have to wait until 2042 for that to happen again. 2015 maybe.

  6. Who said that JPM would melt the coins? typical Bron Suchecki mis-direction. And how do we know that it is not China behind these purchases? China has $T’s of USD, and would be happy to exchange them and use their NYC vaults that used to be JPM’s to store something of value. Bron is silent on that.

  7. This topic got old a good while ago. Please stop this foolish debate.

  8. Why the fuss? I don’t care, but anyone that wants to know, just ask. Lots of people know. The people in the shipping rooms know. UPS/FedX know. Are they sending thousands of monster boxes to one address or/pallets or do they go one at a time to thousands of little coin shops? The people in the shipping depart aren’t rich for $50 bucks they will be happy to tell you. It’s no secret. No doubt you can find out how many coin shops there are in US, visit 10 ask them how many they shipped. You can figure out if 90% didn’t get out.

  9. If Morgan Chase bought/buys one oz silver eagles in MB pallets, then has them melted and recast into 1000 oz bars, there in some sense is no way to prove they ever had those 1 ouncers because they’re gone as in melted. And Ted’s claim can’t be proved with photographic evidence confirmed by a notary or accountant. As always, the best intelligence in the silver market is with the shorts and they aren’t going to tell longs what’s taking place besides misdirection. Time may not settle all arguments if the full facts remain covered up. The main concern to metals investors is appeals to the most dreaded phrase of all—“national emergency.” That’s how gold and silver were grabbed during the Depression. I am not a drum-beater for a reprise of the FDR crimes. Help prevent a recurrence of this. The Silver Squelchers series is about to resume and will deliver beyond most expectations. Special interests always attempt to influence the government for selfish ends. This one easily holds the most influence by far. I’ve said it before about Ted—my opinion is he sometimes says things in an attempt to shake the tree so to speak. That is sometimes valid and in this case, opinion varies.

    • Just the bars were confiscated and notes. Not the coins. Plus you were able to keep $100 in bars. Read the Executive order

  10. Please correct me if I am wrong, but my understanding is that you can buy a silver contract, 1,000 oz../contract, and, If you take delivery, they deliver a 1,000 oz. bar.

    JP wouldn’t waste any money on anything, much less silver eagles and their premium. It would also alert a lot of the wrong people. With their cover of being a hugh broker/dealer they could easily have 100,000 contracts in their system and no one would be the wiser.

    IMHO, I think they are buying big time as the time is soon coming. It is the time to backup the truck and fill it. With premium, it is still at cost.

    Buy for cash and stash.

    SteveW

  11. What happened did you guys run out of articles to post?

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