“The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only.” – disclaimer now posted on the Comex gold and silver daily warehouse stock report as of Monday, June 3, 2013.
Well now. How would you like to get your bank statement in the mail from JP Morgan or Bank of America and see this disclaimer added at the bottom:
“The information in this account statement is taken from sources believed to be reliable; however, JP Morgan Chase & Co. disclaims all liability whatsoever with regard to its accuracy or completeness. This account statement is produced for information purposes only.”
How would feel about that? That’s pretty much the equivalent of what the attorneys for the CME/Comex have done by adding the statement at the top to their daily gold and silver warehouse stock reports. That disclaimer was not in Friday’s warehouse stock report, it was on yesterday’s (kudos to the commenter “anonymous” who discovered this).
The common reaction would be to ask “why now?” But we already know the answer to that question. I’ve suspected for a long time that the Comex vault operators lease out a substantial portion of the gold and silver bars that they keep in both the “registered” and “eligible” account designations. It would be easy income for JP Morgan, a bullion bank who actively engages in gold leasing, to lease out the majority of the bars it stores for delivery – “registered” – and for investors who have taken delivery but keep their gold/silver in JPM’s Comex vault – “eligible.” After all, in any given delivery month, less than 1-2% of the open interest ever stand for delivery, making it very easy for a Comex vault operator to earn extra income by leasing out gold and silver that it knows it will never be required to produce for delivery.
I am willing to bet a very large amount of money that this disclaimer was put on the warehouse reports starting yesterday as a result of the large amount of gold bars that has been physically removed from Comex vaults, and specifically from JP Morgan’s “eligible” account, since the beginning of the year. This means that it is highly likely that a significant portion of the remaining gold and silver sitting in Comex precious metals vaults – especially JPM’s – has been been hypothecated in some form.
For anyone who has witnessed what happened with MF Global and the illegal hypothecation of customer assets, a situation in which JP Morgan is/was inextricably tied, if you believe that Wall Street is willing to hypothecate the sacred customer accounts but would not hypothecate or lease out Comex gold, then you are either tragically naive or terminally ignorant.
To make matters even worse, I just looked up the Comex warehouse rules with regard to storage and guarantee requirements, and there is not any requirement that Comex vault operators establish “allocated” accounts for the individual customers who have taken delivery – theoretically – of gold or silver from the Comex and chose to “safekeep” it in a Comex vault. Here’s the link the to rules: Comex Storage Rules
Yes, insurance is required, but there will come a time – likely sooner than most think – when there will be a rush by Comex vault customers to take delivery of the metal they have been ambivalently assured is sitting in a Comex vault. Unfortunately for them, they will receive a notice that will say “see the disclaimer on our website, check’s in the mail.”