Monetary metals derivatives soar, so who ARE those guys?


12:36p ET Tuesday, September 12, 2018

Dear Friend of GATA and Gold:

The quarterly report from the U.S. Office of the Comptroller of the Currency showing bank trading revenue, published today and called to GATA's attention by our friend J.H., contains two remarkable graphs showing the increase in the notional value of gold and precious metals derivatives held by "U.S. commercial banks and savings associations" quarter by quarter since 2001.

These derivatives, according to the charts, have increased for "foreign exchange and gold" from about $4 trillion at the end of 2001 to nearly $40 trillion in the quarter ending in July this year, and for other precious metals from about $2.5 billion at the end of 2001 to nearly $50 billion in the quarter ended in July this year.

... Dispatch continues below ...


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The chart for "foreign exchange and gold" derivatives is excerpted from the report at GATA's internet site here:

The chart for derivatives for other precious metals is excerpted from the report at GATA's internet site here:

The full report is posted at GATA's internet site here --

-- and at the OCC's internet site here:

Perhaps not coincidentally, the value of the "foreign exchange and gold" derivatives and the derivatives for other precious metals jumps markedly in 2010 just before the seven-year smashing of monetary metals prices that began in 2011. The value of the derivatives increases steadily from 2010 through this year.

Anybody connected with the monetary metals business who is not on the status quo's take and who looked at the charts might ask the question famously posed by Paul Newman's Butch Cassidy in the 1969 film "Butch Cassidy and the Sundance Kid":

"Who are those guys?"

That is, who are these commercial banks and savings associations and what are their connections to the U.S. government? Are they, for example, mainly primary dealers in U.S. government securities, formally agents of the Treasury Department and Federal Reserve?

Or do they include instead, say, lots of community institutions like the famous Bailey Bros. Building & Loan of Bedford Falls, New York, in the 1946 movie that romanticized locally based banking, "It's a Wonderful Life"?

Who besides the U.S. government and other governments might have the money to take on so much risk and have the interest in doing so?

Your secretary/treasurer yesterday asked the OCC's press office why foreign exchange and gold derivatives were combined instead of graphed separately when this prompts suspicion that the U.S. government doesn't want the world to know how much secret intervention is happening in the gold market. While the OCC press office acknowledged that its derivatives charts combine gold with foreign exchange rather than with the other precious metals, it did not explain the obfuscation.

ZeroHedge examined the OCC's quarterly derivatives report in June 2015 and concluded that the explosion in commodity derivatives on the books of banking institutions was mainly the work of JPMorganChase & Co. and that the investment bank had effectively cornered the commodity derivatives markets:

Three years earlier the head of the JPMorganChase commodity desk, Blythe Masters, responding to allegations that the bank was rigging the silver market, told CNBC that the bank had no position of its own in the monetary metals markets and traded there only for clients:

CNBC failed to ask Masters if those clients included the U.S. government or other governments or central banks, but official filings by CME Group, operator of the major futures exchanges, acknowledge that its clients include governments and central banks and that CME Group even extends discounts to governments and central banks for their secret trading of all financial and commodity futures contracts:

The powerful implication here is that the trading of futures market derivatives through intermediaries, particularly JPMorganChase & Co., is the mechanism by which the U.S. government is suppressing commodity prices -- creating vast imaginary supply so that the inflation of the world money supply is not well reflected in commodity prices and does not undermine currency values and the value of government bonds and so commodities do not supplant government currencies as stores of value.

The British economist Peter Warburton foresaw all this in his 2001 essay, “The Debasement of World Currency: It Is Inflation but Not as We Know It”:

Warburton wrote 17 years ago: "How much capital would it take to control the combined gold, oil, and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have overtraded their capital so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices."

This documentation of surreptitious but comprehensive market rigging by government might be an interesting course of inquiry for financial journalism, if there was any.

It might be a compelling course of inquiry for a world gold council, silver miners association, or alliance of oil producers, if there were such organizations and not just shams using similar names.

All commodity-producing, developing countries might see their very lives at stake here.

Investment houses that have put their clients' money into the monetary metals and the companies that mine them might do well to inquire about this stuff too if they ever became more interested in creating value for shareholders than mining them for management fees.

Market analysts who chart prices with a mystical belief in the predictive power of "waves," "candlesticks," and such might come closer to reality by wondering whether the derivative charts are exerting more powerful magic with the help of entities that are authorized to create infinite money and deploy it in secret.

Of course anyone who suggests merely that there might be institutions called central banks and an association of central banks called something like the Bank for International Settlements risks being derided as a "conspiracy theorist." But then government operating in secret is the very definition of "conspiracy," if language itself is not to be manipulated as much as what pretend to be markets.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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PMDerivatives-Q2-2018.pdf192.92 KB
OCC-DerivativesReport-Q2-2018.pdf1 MB
OCC-Q2-2018-FX+Gold.pdf254.44 KB