In Ted Butler's Archive


If there is one mystery in the gold market that has eluded analysts, it is an explanation for the massive inflow of 30 million ounces deposited in a matter of months (around April 2020) into the COMEX-approved gold warehouses, and the big gold ETF, GLD. These physical gold inflows were so large that many wrote about it extensively at the time, but none of the explanations were on the mark – mine included. There were many unusual developments around that massive physical gold inflow, including a blowout in COMEX spread differentials in gold and silver futures. For a short time the contango (the near-month discount to more deferred months) grew so extreme that for the first time ever significant real return was guaranteed with no risk.

Now, it has dawned on me that the explanation for 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. That’s in addition to the 800 million ounces of silver that they borrowed and sold short.

I discovered BofA borrowing and selling short 800 million ounces of silver in the Office of the Comptroller of the Currency’s Quarterly Derivatives report. No such verification is possible in the OCC report for gold. 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 measured in the trillions of dollars. (At the same time gold’s removal from the precious metals category made it simple to detect changes in silver derivatives).

When it comes to the idiocy of precious metals leasing/short selling, gold is always the preferred metal to borrow and sell short. That’s because the gold price is so much higher than the price of silver. By borrowing 30 million ounces of gold, BofA ended up with around $50 billion in cash proceeds (30 million ounces X $1,700). BofA had to borrow and short sell 800 million ounces of silver to end up with $18 billion in cash proceeds (800 million ounces X $23).

The net result is that if Bank of America did borrow and sell short 30 million ounces of gold, as I contend, the roughly $50 billion in cash proceeds 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. Therefore, my contention that Bank of America borrowed and sold short 30 million ounces of physical gold in the April-June 2020 time period can be neither proven nor disproven by the OCC report. Then what am I basing my contention on?

One of the more recent things that points to Bank of America having borrowed and gone short 30 million ounces 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 that its debut was due to a sudden and massive borrowing and short-selling binge.

More than anything Bank of America was probably duped into its current predicament of being short 30 million ounces of gold and 800 million ounces of physical silver by JPMorgan. But why would JPMorgan go out of its way to entice and hoodwink Bank of America into borrowing and then short-selling 30 million ounces of gold and 800 million ounces of silver? Because it greatly benefits JPM. JPMorgan is able to vastly increase its overall silver and gold long position by lending BofA the physical gold and silver it borrowed. JPM knew that BofA would immediately short-sell the borrowed metal. Knowing this, you can be sure that the same JPM operatives 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 this scam. It is interesting to note that more than two-thirds of the 30-million-ounce inflow into the COMEX warehouses in 2020 came in from just two warehouses, Brink’s and JPMorgan.

JPMorgan greatly increased its physical holdings by a derivatives bonus of up to 30 million gold ounces and 800 million silver ounces – courtesy of 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 position – courtesy of BofA. In terms of manipulative genius, no one comes close to JPMorgan.

The explanation of how 30 million ounces 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 other asset class.  Well, scratch your heads no more – the “dumping” of 30 million ounces of physical gold and 800 million ounces of physical silver explains why gold and silver prices did nothing while everything else – including inflation – soared.

It also means that these huge amounts of gold and silver must ultimately be bought back to cover the short position. I can’t stress enough just how bullish this is for these metals.

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