JPMorgan Has Gone Long in Paper and Physical Silver for The First Time Ever

JPMorgan recently accumulated more than 21 million ounces of physical silver in only two months, after already amassing a world-record 750 million ounces. In addition to this, they’ve reduced their 200 million ounce paper short position in June to 100 million ounces in August. Their position has now changed to net long paper silver.

JPMorgan now has the opportunity to take advantage of a potentially huge surge in the price of silver, since they are long in both physical and paper silver at the same time. This is a first for them.

The price of COMEX silver is influenced by speculation more than any other commodity, and almost 50 percent of its total open interest is held short by managed money traders. The level of extreme speculation in COMEX silver, with regards to the percent of open interest, and the production and consumption, far exceeds all other commodities. It is the most manipulated commodity by far.

However, manipulative selling eventually comes to an end.

There has been a history of disappointing rallies over the last seven years. When looking back at JPMorgan’s track record, there is a reasonable explanation for this.

JPMorgan seems to be timing rallies, withdrawing support and buying back short positions at lower prices—at a profit to themselves. Doing this has raked in billions of dollars for JPMorgan.

Since buying Bear Stearns in 2008, they have shown outstanding results, in terms of profits in COMEX silver and gold paper trading. Many people familiar with JPMorgan’s trading record think the bank will continue to short silver on price rallies and buy back on sell-offs into the near future.

One thing is guaranteed: Nobody can anticipate what lies ahead. JPMorgan’s hoard of 750 million ounces of physical silver and 20 million ounces of physical gold is huge exposure to future movements.

In early 2011, when silver ran up to near $50, JPMorgan was caught off guard on the short side and forced to accumulate as much physical metal as possible. Not being caught like this again has been the bank’s primary mission ever since—far more important than even the continuation of its perfect trading record.

Had JPMorgan only been concerned in increasing their COMEX paper profits, they would have let silver and gold price rallies increase much more before exiting. They could have made even more profits than the billions they’d already made had they supported the rallies. Many question the bank’s motives.

It is thought that JPMorgan did not want broad investor attraction to silver and gold, so they did not support price rallies which, when sustained, invite retail investors and artificially high pricing. A sustained rally could have resulted in a kind of retail craze with individual investors. JPMorgan themselves wanted to accumulate huge quantities of physical silver and gold at low prices. JPMorgan is, no doubt, fully aware that when silver and gold prices climb higher, a speculative boom will come, just as it has with many other assets over the years.

However, observers are waking up to JPMorgan’s intentions and huge holdings. People are much more familiar with the bank’s excellent track record on COMEX. They are also more acutely aware that the bank has not responded to public accusations of manipulation. It appears odd to outsiders that JPMorgan has not defended themselves.

Some believe there has been a clear, organized manipulation to keep metal prices low, and for that reason it is entirely possible for the reverse to happen. It is impossible to know when silver and gold prices will start to climb, but it seems unavoidable in the long run given JPMorgan’s huge bet. Also important is watching to see how JPMorgan treats future price rallies. Will they add to short positions or not?

Other precious metals have shown significant upward movement lately and broken through key averages. At some point in the near future, look for silver and gold to do the same.

Questions about the precious metals market and your investment strategy? Contact West Hills Capital to speak with one of our metals strategists. Call (800) 867-6768 or send us a message today.