From Profits to Pay, JPMorgan's Gold Secrets Spill Out in Court
Comment of the Day

August 01 2022

Commentary by Eoin Treacy

From Profits to Pay, JPMorgan's Gold Secrets Spill Out in Court

This article from Bloomberg may be of interest to subscribers. Here is a section:

JPMorgan holds tens of billions of dollars in gold in vaults in London, New York and Singapore. It is one of four clearing members of the London market, where global gold prices are set by buying and selling metal held in a few London vaults -- including JPMorgan’s and the Bank of England’s.

JPMorgan is the biggest player among a small group of “bullion banks” that dominate the precious metals markets, and internal documents presented by prosecutors provided a glimpse of just how dominant a role the bank has played. 

In 2010, for example, 40% of all transactions in the gold market were cleared by JPMorgan. 


Another set of important clients were central banks, which trade gold for their reserves and are among the biggest players in the bullion market. At least ten central banks held their metal in vaults run by JPMorgan in 2010, according to documents disclosed in court. 

Eoin Treacy's view

With such a large position in the gold market, JPMorgan has both significant information and motive to swing prices in the interests of its trading desks on an intraday basis. That’s not quite the same as saying they have the capability to depress pricing over a prolonged period. That kind of overt manipulation would quickly attract the attention of other market participants and opposing positions aimed at pressuring the bank would be taken.

The one thing this case does highlight is how much control JPMorgan has over the physical trade in gold. As with every other market, derivatives trade at multiple the value of the underlying but are ultimately influenced by the physical’s price moves. The biggest question for the market at present is whether this trial will result in less trading of derivatives and therefore a less liquid market.
Gold has partially unwound a deep short-term oversold condition as it bounced from the psychological $1700 area and the region of the 1000-day MA. That level needs to hold if the two-year range is to hold and the benefit of the doubt to secular recovery.

JPMorgan continues to trend lower in a consistent manner. The one-day rebound in the middle of July has not seen any follow through and the succession of ranges, one below the last, is still in place. Moreover, despite strong interest margins, an inverted yield curve is not good news for banks.

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