Friday, April 11, 2014

Gold and Silver News April 11 , 2014 Updates -- Blythe Masters( Former JP Global Commodities Head ) Under Investigation By Federal Prosecutors ....... Ed Steer's Gold an Silver Report for April 11 , 2014 - data , News and Views - focus on the precious metals !

Blythe Masters Under Investigation By Federal Prosecutors

Tyler Durden's picture

There is much new info in the just released Bloomberg profile on the infamous ex-JPMorganite Blythe Masters, among which the disclosure that she had made it clear that she had wanted to go along with the disposable JPM physical commodities unit (which as was reported recently, was sold to Swiss commodities giant Mercuria) and "and continue as the group's chief", a plan which did not work out as she had planned since she has no plans to "join the unit’s purchaser" (although joining Glencore is another matter entirely, and one which looks increasingly plausible) but what we find most striking is the following revelation: "Masters is under investigation by federal prosecutors in Manhattan, according to two people with knowledge of the matter. That probe was opened following a settlement with regulators that alleged JPMorgan manipulated power markets in the Midwest and California."
This is somewhat ironic because it was none other than Zero Hedge which asked nearly a year ago if "JPMorgan's "Enron" Will Be The End Of Blythe Masters?" Suddenly, the answer appears to be yes.
More from Bloomberg:
The existence of a probe surrounding JPMorgan’s role in the energy market has been known since August, when it was reported by several news organizations, including Bloomberg News, and subsequently disclosed by the New York-based bank. What wasn’t known was prosecutors’ interest in Masters.
We also learn that in addition to Mercuria, two other bidders for the JPM unit were Blackstone and Macquarie:
Blackstone appeared to have an inside track on Mercuria and Macquarie in the final round of bidding, according to three people involved in the process. The buyout firm had a significant banking relationship with JPMorgan through its history of acquisitions.

Its limited presence in commodities and energy trading also made it the most likely candidate to buy JPMorgan’s business in its entirety and bring Masters and her team on board to run it, the people said.
it is here that Masters' legal liabilities reared their, or technically her, ugly head:
As the January deadline for bids approached, the question of Masters’s legal exposure to the federal investigation remained, according to the people involved in the process.

JPMorgan didn’t provide a level of detail about the investigation that was satisfactory to some of the bidders, according to the people familiar with the process. Masters dismissed any concerns about the inquiry, one person said.

“We didn’t receive any complaints during the process,” said Marchiony, the bank spokesman, about information on the lingering investigation. 

Blackstone executives wondered whether there could be more to it than the bank was letting on, said one of the people. Given that Masters might end up as the public face of Blackstone’s commodities business, they were wary, this person said.

Macquarie also was wary about potential legal issues, said one of the people. The bank didn’t want any unforeseen developments to harm its reputation in the U.S. energy markets.

Mercuria’s executives were less concerned about the legal exposure, according to a person familiar with its bid. The firm, started in 2004 by two former Goldman Sachs Group Inc. traders, had a minimal presence in U.S. power and gas markets, and it could run JPMorgan’s business without Masters.
Could it perhaps be because Swiss regulators are even more clueless and coopted than their US peers? Considering the amount of Libor manipulators that ended up in Swiss asset managers the answer is a resounding yes. That said, even Mercuria appears to have nixed the idea of Blythe coming on board as part of the commodities group package.
This is not surprising. What is however, is just how concerned Blythe was about her own security.
During a due diligence period from mid-December through mid-January, a handful of bidders emerged. The most serious were Mercuria, New York-based buyout firm Blackstone Group LP (BX) and Macquarie Group Ltd. (MQG), an Australian bank. A fourth contender, Grupo BTG Pactual of Brazil, dropped out in part because of the extra capital Brazilian regulators would require it to hold, a person said at the time.

Masters met with senior executives from the three final bidders in New York and elsewhere, according to people involved in the process. Her arrival at some of the meetings, with an escort of bodyguards, left an impression on her unit’s suitors, said two of the people.
Now why would one go to a diligence meeting with bodyguards - it is almost as if she was convinced someone meant her harm regardless of the circumstances. Whyever could that be? Certainly not due to the way her group conducted itself full of "integrity" and abidance by the rules. Just recall from her CNBC interview in April 2012, in which she made the following on the record disclosures:
  • JPM's commodities business is not about betting on commodity prices but about assisting clients"... "it's about assisting clients in executing, managing, their risks and ensuring access to capital so they can make the kind of large long-term investments that are needed in the long run to expand the supply of commodities"...
  • "There's been a tremendous amount of speculation particularly in the blogosphere on this topic. I think the challenge is it represents a misunderstanding as the nature of our business. As i mentioned earlier, our business is a client-driven business where we execute on behalf of clients to achieve their financial and risk management objectives. The challenge is that commentators don't see that. So to give you a specific example, we store significant amount of commodities, for example, silver, on behalf of customers we operate vaults in New York City, Singapore and in London. And often when customers have that metal stored in our facilities, they hedge it on a forward basis through JPMorgan who in turn hedges itself in the commodity markets. If you see only the hedges and our activity in the futures market, but you aren't aware of the underlying client position that we're hedging, that would suggest inaccurately that we're running a large directional position. In fact that's not the case at all.
  • "We have offsetting positions. We have no stake in whether prices rise or decline. Rather we're running a flat or relatively flat matched book.
  • "What is commonly out there is that JPMorgan is manipulating the metals market. It's not part of our business model. it would be wrong and we don't do it."
Of course, if some or all of the above bullet points were flat our lies, one can understand why Blythe could be concerned about her personal security. Which in the aftermath of the London Whale fiasco in which we learned that JPM mostly excelled in lying about everything, appears to have been precisely the case.
In retrospect we can understand why the inventor of the Credit Default Swap would only dare go out in public with a couple of armed gorillas covering her back.


The price action in gold on Thursday was very similar in most respects to the price action on Tuesday---and you can see that in the Kitco chart below.  There were a couple of short, sharp rallies in Far East trading between the New York open on Wednesday evening, right up until 9 a.m. Hong Kong time on their Thursday morning.  Then the price traded flat until the 8 a.m. BST London open.  The rally continued at that point, as did the efforts of the sellers of last resort.  However it all ended minutes after Comex trading began in New York yesterday morning---and it was all downhill into the close from there.
The low and high ticks were recorded by the CME Group as $1,311.0 and $1,324.90 in the June contract.
Gold finished the Thursday session at $1,318.10 spot, up $5.80 on the day.  Volume, net of May, was 134,000 contracts, with well over a third of that amount occurring before the London a.m. gold fix, as the HFT boyz did what was necessary to prevent the gold price from blowing out to the upside and taking out the 50-day moving average with any kind of authority---which it would have done handily if the not-for-profit sellers hadn't intervened.
It was virtually the same story in silver---and one can only imagine the rather large handle the silver price would have closed at if JPMorgan et al hadn't interfered.
The low and high ticks were recorded as $19.86 and $20.40 in the May contract, an intraday move of almost 3%.
Silver closed the trading day barely above the $20 spot mark at $20.03---up 18.5 cents on the day---but "da boyz" took it back below twenty bucks 45 minutes later, the moment that trading began in the Far East on their Friday.  Gross volume was over 80,000 contracts once again, but it all netted out to around 38,000 contracts, about the same volume as Tuesday.
Platinum and palladium had similar chart patterns, but their prices weren't capped for the final time until noon in New York.  Both closed with very decent gains on the day.  Here are the charts.
The dollar index closed in New York late on Wednesday afternoon at 79.53---and then didn't do much of anything until the equities markets opened in New York yesterday morning.  Then the index dropped down to its 79.35 low around 11:20 a.m. EDT---and from there it rallied a handful of basis points into the close.  The index finished the Thursday session at 79.41---down 12 basis points on the day.
Here's the 6-month dollar index chart---and you can see the damage that has been done during the last five trading sessions.


The CME's Daily Delivery Report showed that 46 gold and 20 silver contracts were posted for delivery within the Comex-approved depositories on Monday.  Credit Suisse was the short/issuer on 45 of the gold contracts---and JPMorgan and Canada's Scotiabank stopped 38 of them.  In silver, Morgan Stanley and JPM were the two issuers---and Canada's Scotiabank stood for delivery on all 20 contracts.  The link to yesterday's Issuers and Stoppers Report is here.
There was a tiny withdrawal from GLD yesterday, as an authorized participant took out 8,429 troy ounces.  I would guess that this would represent a fee payment of some kind.  And as of 10:05 p.m. EDT yesterday evening, there were no reported changes in SLV.
Joshua Gibbons, the "Guru of the SLV Bar List," updated his website with the goings-on over at SLV for the reporting week that ended on Wednesday---and here's his report:  "Analysis of the 09 April 2014 bar list, and comparison to the previous week's list---672,916.9 oz were added (all to Brinks London), 145,919.6 oz were removed, no bars had a serial number change."
"The bars added were from: KGHM Poland (0.4M oz), Solar Applied Materials (0.2M oz and 2 others.  The bars removed from were: KCM SA (0.1M oz), and 2 others. As of the time that the bar list was produced, it was overallocated 39.6 oz.  All daily changes are reflected on the bar list."  The link to Joshua's website is here.
The U.S. Mint had sales report yesterday, but it was on the skinny side.  They sold 3,000 troy ounces of gold eagles---25,000 silver eagles---and 300 platinum eagles.
Over at the Comex-approved depositories on Wednesday, they reported receiving 14,202 troy ounces---and shipped out zip.  All of the gold went into Brink's, Inc.  The link to that 'activity' is here.
Of course it was a lot busier in silver, as a chunky 1,123,832 troy ounces were reported received---and nothing was shipped out.  The link to that action is here.
If you haven't noticed from the CME warehouse report yet---and just as a point of interest---JPMorgan Chase is the top dog in physical silver as well, as their depository now hold 45.49 million troy ounces of the stuff---a couple of million more than does HSBC USA.  One has to wonder how much more silver they may have stashed away, either in other Comex depositories [or elsewhere] in good delivery form that we just don't know about.  Then there's the question of who the mystery buyer is of all those silver eagles that have been sold for the last year or so.  Ted Butler suspects JPMorgan---and I'm not about to argue the point.


Non redundant news and views ......

Christine Lagarde: Huge Government and banks debts risk new financial crash

George Osborne is to tell an audience of free-market campaigners in Washington that the UK's economic turnaround will defy those who say austerity and low wage growth will lead to long-term stagnation. In his first major speech in the US, the chancellor will attempt to demolish claims that a further five years of austerity will restrict growth and hurt workers' living standards.
Osborne will argue at the American Enterprise Institute that low interest rates, the Bank of England's creation of new money through massive bond purchases under its quantitative easing programme and a strengthened banking sector can secure a bright future for the UK.
Osborne's speech comes after head of the International Monetary Fund, Christine Lagarde, issued a warning to world leaders that they need to do more to deal with huge government and bank debts that she said continue to drag down growth and undermine the stability of the financial system. Speaking at the IMF's spring conference, Lagarde said leaders needed to co-operate in their efforts to repair public sector and bank finances to protect against a repeat of the 2008 crash.
This article from The Guardian has had a major headline change, as you'll find out if you click on the link. It now reads a much softer sounding "George Osborne to use first major U.S. speech to rebuke critics of austerity."  It was posted on their website early yesterday afternoon BST---and I thank South African reader B.V. for digging it up on our behalf.

Top economists warn Germany that EMU crisis as dangerous as ever

The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin.
"Debts above 130pc of GDP for Italy and 170pc for Greece are a recipe for disaster once we go into the next downturn," said Professor Charles Wyplosz, from Geneva University.
"Today's politicians believe the crisis is over and don't want to hear any more about it, but they have not tackled the core issues of fiscal union and public debt," he said, speaking at Euromoney's annual Germany conference.
This Ambrose Evans-Pritchard offering showed up on Internet site very early on Wednesday evening BST---and I thank Roy Stephens for another contribution to today's column.

Bank of China Sydney branch issues 2 billion yuan bonds

Bank of China's Sydney branch issued 2 billion yuan (325 million U.S. dollars) of yuan bonds on Wednesday, the first yuan bond in Australia, the bank announced on Thursday.
The two-year bonds, with a coupon rate of 3.25 percent, were well-received in the market, oversubscribed 1.45 times.
Some 27.5 percent of the bonds were subscribed by local investors, said the bank.
This short article appeared on the Internet site early yesterday evening Beijing time---and I thank reader 'David in California' for sharing it with us.

Five King World News Blogs/Audio Interviews

Pat Heller: U.S. has rigged precious metals markets for 80 years

Writing for Coin Week, Patrick Heller of Liberty Coin Service in Lansing, Michigan, provides a brief history of the U.S. government's mechanisms of surreptitious market intervention and headlines his commentary, "The U.S. Government Has Rigged Precious Metals Markets For 80 Years".

Chris Martenson and Alasdair Macleod discuss China's corner on gold

Market analyst Chris Martenson and GoldMoney's Alasdair Macleod discuss China's increasing control of the gold market, anti-gold propaganda in the Western financial news media, the likelihood that Western governments will commandeer the gold of private investors, and other provocative topics in an interview posted this week in audio and text versions at Martenson's Internet site,

U.S. mined silver output continues to fall--USGS

U.S. mines produced 80,900 kilograms (2,600,995 troy ounces) of silver in November 2013, a 14% decrease from the 94,300 kg (3,031,815 oz) produced in November 2012, the U.S. Geological Survey reported.
Monthly silver production continued on a downward trend that began in June 2013, the USGS observed.
Average daily U.S. silver production in November 2013 was 2,700 kg (86,807 oz), compared with 3,140 kg (100,953 oz) in November 2012.
The Silver State of Nevada led silver production in November 2013 with 19,700 kg (633,369 oz) of output, while the combined total production of Alaska, Arizona, California, Colorado, Idaho, Missouri, Montana, New Mexico, South Dakota and Utah was 60,900 kg (1,957,980 oz).
Total U.S. silver output from January to November 2013 totaled 956,000 kg (30,736,114 oz), said the Geological Survey.
Wow!  U.S. silver production is even worse than I imagined it to be---only a bit over 33 million ounces per year based on current production rates.  That means that the U.S. Mint has to import about 10 million ounces of silver per year just to meet demand.  One has to wonder how much more has to be imported on a yearly basis to meet the rest of U.S. silver demand.  I would bet that it's a lot.  The above five paragraphs are all there is to this news item that was posted on the Internet site just after midnight Reno time this morning, but it's worth reading a second time if you've already read it.



My advice, as it has been, is to move to the sidelines while holding large positions in physical silver and gold. Regardless of what the markets do, silver and gold represent eternal wealth, and the bid to sleep undisturbed at night. No amount of money is worth the loss of peace of mind. The power of gold opened the American West and populated Alaska. Men have spent their lives searching for gold. You can own gold by the simple action of swapping Federal Reserve notes for the yellow metal. I advise you to do it. - Richard Russell
It's getting repetitive, so I'm not going to dwell too much on what happened in Far East and early London trading on Thursday except to say that the sellers of last resort were at battle stations once again preventing all four precious metals from doing what they wanted to---and that's move sharply higher.  This was particularly true in gold, as "da boyz" wanted to prevent a major break-out above its 50-day moving average---and they succeeded.
Here, once again, are the 6-month gold and silver charts with yesterday's price action included.
Note that gold closed above its 50-day moving average, but would have closed considerably higher than that if the HFT traders hadn't been involved.
And no matter how well silver performs intraday, it's always sold back down to, or just below, the $20 spot price mark.  Yesterday they had to peel about 40 cents off the price to do it---and looking at the chart, it's a pattern that's obvious over the last 13 consecutive trading days.
In Far East trading on their Friday, the gold price didn't do much, but got sold back down below unchanged an hour before London opened.  And as I mentioned earlier, silver got sold back below the $20 mark the moment that trading began in New York yesterday evening---and every tiny rally attempt above that price mark has been sold off.  Platinum and palladium aren't doing much.  And as I write this paragraph, London has been open 75 minutes---and volumes aren't overly heavy, less than half of what they were yesterday at this time.  Roll-overs out of the May silver contract continue unabated.  The dollar index is comatose.
Today, at 3:30 p.m. EDT, we get the latest Commitment of Traders Report, I'll guess that we might see further deterioration in the Commercial net short position in gold, but that's just a guess based on a quick glance at the gold price action during the reporting week.  I'm neutral on silver, but nothing will surprise me.  The thing that makes me uncertain as to direction is that fact that all the volume from the prior week's COT Report may not have been reported in a 'timely manner'---so we could see some spill-over into today's report.  But whatever the numbers, I'll have them for you tomorrow.
And as I hit the 'send' button on today's column, I note that all four precious metals are below their closing prices in New York yesterday afternoon. Volumes are still nothing special---and the dollar index is now up a small handful of basis points.
Since today is Friday, nothing would surprise me regarding precious metal price action, especially during the New York session.  Gold is now a few dollars above its 50-day moving average---and I'll be interested in seeing if the rally [such as it is] will be allowed to continue, or whether it 'fails' at this point.
That's all I have for today.  Enjoy your weekend, or what's left of it if you live west of the International Date Line---and I'll see you here tomorrow.