What does JPMorgan need Physical Silver For?



A good question on the Physical Silver came in on our previous article. So we went back to Vince for his comment on it.- Soren K.

Original Article HERE

Question by Paul :

Hey Vince, a great read, thanks. One question, what is JPM aiming to do with all their physical? To protect from a price rise for someone or engineering one ... manipulating it up or down??

Paul, Good Question: the physical in their vault is not necessarily theirs. The lessons of history are that ownership is not as important as control.
Lets say a large investor has a couple million oz of silver. He stores it in the JPM vault. Maybe it just sits there. Maybe he leases it out. Maybe he uses it as collateral to buy stocks. But when JPM wants silver to go up, they could just tell the client " You know Mr. Jones, we think Silver lease rates are too low and going to go up. why dont you make your silver unavailable for lease this month?Thats our recommendation". Get enough clients to listen and you make a short squeeze.
A lot of producers will borrow silver for a month when they are behind schedule pulling it out of ground. So when lease rates go up high enough they are forced to
  1. BUY silver to make delivery,
  2. lease it at higher rates, or
  3. sell deferred futures and buy spot in spread form, keeping their position flat but being able to satisfy contract delivery.

This method can be used for goosing the market higher or slamming it lower. Of course JPM has its own pohysical silver too. But that is largely hedged, until they see a reason to unhedge it or short the market. Having physical silver hedged gives them no price risk, earns a small rate of return ,and the vault storage is a bank cost anyway. And with their finger on thepulse of spreads, they can better sense when a counterparty is overleveraged and lean on him until he falls if they did that sort of thing....

Of course they could just be holding the silver for future sales to clients too who end up paying money to store it exactly in the same spot.- VBL




Imagine taking delivery of 300,000 pounds of silver in a day- UNPOSSIBLE


- Soren K.


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