Solving A Great Gold Mystery

January 24, 2022

If there is one mystery in the gold market that I believe has eluded analysts and commentators (certainly including yours truly), it is a compelling explanation for the unprecedented and massive inflow of physical metal, more than 30 million ounces, that came to be deposited in a matter of months, starting around April 2020, into mostly the COMEX-approved gold warehouses, but also into the big gold ETF, GLD. The physical gold inflows were so large that many wrote about it extensively at the time, but none of the explanations seemed to be on the mark – my own included.

Remembering that special time, now approaching the two-year mark, there were so many unprecedented developments around that massive physical gold inflow, including a blow out in COMEX spread differentials in both gold and silver futures, so as to defy simple economics. For a short time back then, the impossible occurred, namely, the contango (the near month discount to more deferred months) grew so extreme that a significant real return was guaranteed with no risk for the first time ever (to this old-time spread trader).

Now nearly two years later, it has dawned on me what occurred back then that explains the most unusual time period ever in both gold and silver. It has occurred to me that the simple explanation for all the strange occurrences in the gold market back then was that Bank of America borrowed and sold short as many as 30 million ounces of gold and not just the 800 million oz of silver I’ve been writing about. BofA borrowing and shorting gold fits like a glove with it doing the same in silver, as I hope to explain.

Upfront, while I discovered BofA borrowing and selling short 800 million oz of silver from the Office of the Comptroller of the Currency’s quarterly derivatives report and fitting that into what transpired in real world silver events, no such verification (or rejection) is possible in the OCC report for gold. As I’ve previously explained, the OCC moved gold into the FX derivatives category back in 2015, making it impossible to track gold OTC derivatives because the FX category is so large – measured in the trillions of dollars – so as to obscure gold developments in the same category. (At the same time gold’s removal from the precious metals category made it really simple to detect changes in silver derivatives).

The net result is that if Bank of America did borrow and sell short 30 million oz of gold, as I contend, the roughly $50 billion in cash proceeds and derivatives position that BofA ended up with as a result, wouldn’t show up in the OCC report, as BofA has held between $4 and $5 trillion in FX/gold derivatives positions since Dec 31, 2019 and $50 billion in gold derivatives simply wouldn’t stand out – as $50 billion would represent little more than 1% of BofA’s total FX/Gold category position. Therefore, my contention that Bank of America borrowed and sold short 30 million oz of physical gold in the April-June 2020 time period can be neither proven nor disproven by the OCC report alone. Then what am I basing my contention on?

First is a bit of common sense. When it comes to the idiocy and fraud of precious metals leasing/short selling, gold is always the preferred metal to borrow and sell short. This was true back in the last precious metals leasing/short sale fiasco of 20 years ago and likely remains true in today’s massive blunder by BofA. That’s because the gold price is so much higher than the price of silver, that it takes much less in ounce terms to borrow and sell short physical gold than silver. By borrowing 30 million ounces of gold, BofA ended up with around $50 billion in cash proceeds (30 million oz X $1700). BofA had to borrow and short sell 800 million oz of silver to end up with $18 billion in cash proceeds (800 million oz X $23). 

Let’s face it, as dumb and dangerous as it is to borrow and sell short precious metals, there is somewhat of a perverse logic in borrowing and selling short gold rather than silver. That’s because there are billions of ounces of gold bullion in the world, 3 billion oz to be precise (plus another 3 billion oz in non-bullion equivalent form) and the 30 million oz I contend BofA is short is only 1% of all the gold bullion in the world. In silver, the 800 million oz I contend BofA is short is close to 40% of the two billion oz of world silver in 1000 oz bars – making it much more difficult to buy and deliver silver than gold.

Sure, a hundred dollar move up in gold will “cost” BofA $3 billion in adverse mark to market, but the gold market is deep enough to make it more feasible that Bank of America could limit the damage if it put its mind to it. But how the heck would it buy back 800 million oz of silver in a world where only two billion oz exist and pronounced shortage seems around the next corner?

To be fair, while the 30 million oz gold short position that I claim Bank of America holds in the OTC market is small relative to total world bullion inventories, it is still large enough that, by itself, it is much greater than the entire net commercial short position on the COMEX, the world’s leading precious metals derivatives exchange. BofA’s 30 million oz short position is equal to 300,000 COMEX gold contracts, substantially larger than the 221,000 contracts of the total commercial net short position – meaning one bank may be holding a larger short position than the combined net short position of all the commercials on the COMEX.

One of the more recent developments that points to Bank of America having borrowed and gone short 30 million oz of physical gold is that it has been, for more than a year, a big stopper of gold and silver deliveries on the COMEX in its house account (but was a big net issuer of both in December). In meaningful terms, Bank of America has, quite literally, burst upon the precious metals’ scene starting a year and a half ago, after never really participating in this market before – strongly suggestive its debut was due to a sudden and massive borrowing and short selling binge.

I continue to believe Bank of America was duped into its current predicament of being short 30 million oz of gold and 800 million oz of physical silver. No one, no matter how dumb or misinformed, would do such a thing after careful and objective due diligence.  There’s no way BofA senior management woke up one day and decided to put the organization in potential harms’ way by borrowing and selling short gold and silver in the quantities I claim - it had to be tricked in some way.

As to who did the hoodwinking of BofA, you should know by now the only possible answer is JPMorgan, which also happens to be the only entity capable of such a feat. After all, I have chronicled how JPM accumulated 1.2 billion oz of physical silver and 30 million oz of physical gold on these pages over the past decade or so. And please understand that when I say JPMorgan has done this or done that, that anyone would be hard-pressed to find an ounce of silver or gold on JPM’s books – it’s all held in affiliate and nominee names. JPM knew when it embarked on its physical silver and gold accumulation plan that it must conceal and camouflage what it was doing and took great pains to hide its actual ownership from the get go.

As to why JPMorgan would go out of its way to entice and hoodwink Bank of America into borrowing and then short selling 30 million oz of gold and 800 million oz of silver, the answer is so obvious and straightforward as to be self-evident – to greatly benefit JPM primarily and, secondarily, to damage a competitor.

The benefit to JPMorgan is for it to be able to vastly increase its overall silver and gold long position in the only manner possible. By lending BofA the physical gold and silver it borrowed, JPM knew full-well that BofA would immediately short sell the borrowed metal (that’s how these nutty precious metals “loans” work) and knowing this, you can be sure that the same JPM interests which loaned the metal were in place to buy all the metal sold short by BofA. This is so criminally genius that only JPMorgan could have devised and implemented the scam. By the way, it is interesting to note that more than two-thirds of the 30 million oz inflow into the COMEX warehouses in 2020 came into just two warehouses, Brinks and, drumroll, ..…..the JPMorgan warehouse.

Of course, I’m not suggesting that JPM and its friends and family could actually increase the amount of physical metal they owned, as they are criminal geniuses not magicians of alchemy. But the net effect was that JPM owned the same amount (more or less) of physical metal after BofA sold it short (unknowingly) back to JPM as it did before the transactions – but with a giant kicker. JPMorgan as a result of its criminal cunning and duplicity, greatly increased its physical holdings by a derivatives bonus of up to 30 million gold oz and 800 million silver oz – courtesy of the dingbats at BofA. In other words, interests related to JPMorgan ended up owning the same amount of physical metal as they did all along, but augmented by a new massive derivatives long position – courtesy of BofA. In terms of criminal genius, no one comes close to JPMorgan.

As with all of the things that I’ve discovered over the decades, my imagination is nowhere near fertile enough to have dreamed up any of them on a whim. All, including this massive snookering of Bank of America by JPMorgan, are borne out in the continuing flow of public facts and data. Hard to believe, but that’s the way it is.

Perhaps the most important takeaway from the solving of a mysterious “cold case” in gold, namely, explaining how 30 million oz of gold suddenly got deposited in the Spring of 2020 into the COMEX warehouses, also explains another great mystery of the recent past. Many (most) have scratched their heads looking for an explanation for why gold and silver prices have performed so poorly over the past year or so in the face of record surges in the price of just about every asset class there is – from stocks and real estate to cryptocurrencies and collectibles of all types – including virtual reality collectibles called NFTs.  Well, scratch your heads no more – the “dumping” of 30 million oz of physical gold and 800 million oz of physical silver should explain why gold and silver prices did nothing while everything else – including inflation – soared.

Of course, what I just described, the dumping and market adjustment to such massive amounts of physical gold and silver is now completed and reflected in past price performance. Now all that remains is the “other side” of leasing/short selling in which the borrower, Bank of America, must seek to “undo” its ill-conceived venture into precious metals. For gold and silver investors, that should represent the start of very good times.

As always, if Bank of America or the Office of the Comptroller of the Currency have a radically different explanation from mine, I would encourage both to offer that explanation.

Ted Butler


In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.
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