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View Full Version : Attention, J.P. Morgan customers: 'Got gold?'



kvanar
7th February 2011, 19:47
http://mycrains.crainsnewyork.com

By AARON ELSTEIN on February 7, 2011 3:29 PM


In a sign of how hot gold has become, J.P. Morgan announced Monday that it will start accepting the precious metal as collateral for certain transactions instead of cash.

"Many clients are holding gold on their balance sheets as an inflation hedge and are looking to make these assets work for them as collateral," said John Rivett, a collateral management executive at J.P. Morgan's securities services division, in a prepared statement.

The bank said customers could post gold as collateral to borrow securities or for ultra-short-term loans known as repurchase obligations.

Before you start pawing through your jewelry drawer, be aware that J.P. Morgan's announcement is targeted at institutional investors, some of which have become ravenous buyers of gold since the financial crisis struck.

Since 2007, the price of physical gold has doubled, peaking at $1,423 per ounce in December. It now fetches around $1,350. The metal has become a hot commodity among money managers convinced that paper currencies, such as the dollar or euro, are doomed to lose value in the coming years as inflationary pressures build in the U.S. and Europe.

J.P. Morgan says it's the only "tri-party collateral manager" to accept physical gold as collateral. It added that it expects to start accepting additional precious metals and commodities as collateral later this year.

Perhaps J.P. Morgan will start accepting wheat. The grain's price per bushel has jumped by 67% since the summer of 2010.

saltydog
7th February 2011, 19:51
It would not seem right to give JPM your PMs.

gollumthegreat
7th February 2011, 20:17
It's pesticides they should be given. In large doses.

Mighty Moose
8th February 2011, 22:06
This thread has been seriously overlooked. Does anyone realize the implications of this announcement going forward? This would prevent another forced liquidation of gold for cash when -- not if -- stock markets take a permanent nose dive this time, especially in the US.

We saw what happened in 2008, but now this maneuver would garner much different results. Big institutional investors won't have to sell off their gold positions -- hedged or otherwise -- in order to come up with the needed cash to settle margin accounts or other leveraged positions because JPM & their kind will already have their collaterized gold as payment, thus NO SELLING OFF of GOLD during the crashing of equities!

The second part of this equation is that JPM doesn't want people giving them devaluing FRNs which they know will soon be replaced by a different US currency with no more priviledged international functions. This might appear as fancy conjecture, but this will soon become evident.

What you are seeing is the No. 1 US bank (the FED's bank) green-lighting gold as money, while at the same time giving an indirect thumbs down on the USD. They don't want to be holding the soon-to-be worth-less "bag" of dollars either.

valerb
8th February 2011, 22:57
This thread has been seriously overlooked. Does anyone realize the implications of this announcement going forward? This would prevent another forced liquidation of gold for cash when -- not if -- stock markets take a permanent nose dive this time, especially in the US.

We saw what happened in 2008, but now this maneuver would garner much different results. Big institutional investors won't have to sell off their gold positions -- hedged or otherwise -- in order to come up with the needed cash to settle margin accounts or other leveraged positions because JPM & their kind will already have their collaterized gold as payment, thus NO SELLING OFF of GOLD during the crashing of equities!

The second part of this equation is that JPM doesn't want people giving them devaluing FRNs which they know will soon be replaced by a different US currency with no more priviledged international functions. This might appear as fancy conjecture, but this will soon become evident.

What you are seeing is the No. 1 US bank (the FED's bank) green-lighting gold as money, while at the same time giving an indirect thumbs down on the USD. They don't want to be holding the soon-to-be worth-less "bag" of dollars either.

I don't follow this logic. If any organization or individual is leveraged, they don't own anything but paper and they still need to come up with the funds to meet a margin call. Unless they also happen to own physical Gold, they are in the same shape today as they were in 2008. The market is filled with investors that are playing in many different arenas and when everything goes to hell in a hurry, the selling goes into warp speed to keep on top of what they value the most. Gold and Silver are not going to be exempt from another market crash, that is just wishful thinking and this is only one of many explanations given to justify Gold and Silver being untouchable.

Just keep in mind prior to 2008, the hundreds of articles that stated Gold and Silver would shoot to the moon if we ever had a financial meltdown and we had one far worse than most of them could imagine and Precious metals bit the dust along with everything else. It did not turn out to be the safe haven everyone predicted. But of course it will be different this time, why, because our analyst are telling us it will be. What more proof could we possibly ask for.

If you owned some Gold, would you put it up to meet margin calls. Remember that it is only worth what the spot price says it's worth. If the Gold spot price declines, you need to come up with more gold to build up your margin requirements. Unlike those nasty FRN's that do not need to be supplemented, even if they decline in value.

gollumthegreat
8th February 2011, 23:26
Moose, what you say is enlightening. The FEDs poodle have indeed given the thumbs down on the USD. Another (massive) nail in the Worlds Reserve Currency. The last nail was China and Russia's announcement of bilateral trade minus the USD. Maybe the final nail will be the rest of the World finally giving the USD the push when Congress vote to raise the US Debt Ceiling in March, or too many Customers at once, wanting delivery of their Comex Silver. Times are interesting to say the least. I dare say JPM will soon announce they will be accepting Silver Bullion in transactions. If so, I bet it is a one way transaction to cover their shorts. Things are afoot. I think you are not wrong in any of your predictions either.

kvanar
9th February 2011, 00:39
The FEDs poodle have indeed given the thumbs down on the USD.

I'm not exactly sure that's the takeaway here. Well at least I didn't read it completely that way.

Don't get me wrong. I think the USD is toast but in the case of this article, perhaps the Morgue was happy to accept Gold as collateral since a lot of their institutional customers had the yellow stuff sitting around gathering dust in warehouses. Or it could be the "fancy conjecture" that Moose refers to...

Bear in mind that London's LME and NYSE ICE have already been accepting Gold as collateral on credit swaps prior to this news.

I wonder if this bit of news contributed to the price spike yesterday despite the Chinese rate hike?

Mighty Moose
9th February 2011, 02:09
I'm not exactly sure that's the takeaway here. Well at least I didn't read it completely that way.

Don't get me wrong. I think the USD is toast but in the case of this article, perhaps the Morgue was happy to accept Gold as collateral since a lot of their institutional customers had the yellow stuff sitting around gathering dust in warehouses. Or it could be the "fancy conjecture" that Moose refers to...

Bear in mind that London's CME and NYSE ICE have already been accepting Gold as collateral on credit swaps prior to this news.

I wonder if this bit of news contributed to the price spike yesterday despite the Chinese rate hike?

I'm not intentionally picking on you, Kvanar, but am I missing something here because I thought the CME was only based in the USA? The CME=Chicago Mecantile Exchange or it's owner, CME group (which owns the NYMEX, in addition to the COMEX, etc.).

Anyhow, to my understanding, the CME clearing house has been using JPM's vaults to store this collaterized gold. JPM has also been accepting physical gold as collateral for futures contracts held on NYMEX.

NOTE: JPM is NOT accepting ETF gold like GLD for collateral on futures contracts. They don't want paper on deposit either, ha ha ha, cause they obviously know first-hand that that crap is highly leveraged. :rolleyes:

kvanar
9th February 2011, 02:20
Moose - nice catch. Typo.
Meant to say "London's LME"!

Haha :)



I'm not intentionally picking on you, Kvanar, but am I missing something here because I thought the CME was only based in the USA? The CME=Chicago Mecantile Exchange or it's owner, CME group (which owns the NYMEX, in addition to the COMEX, etc.).

Anyhow, to my understanding, the CME clearing house has been using JPM's vaults to store this collaterized gold. JPM has also been accepting physical gold as collateral for futures contracts held on NYMEX.

NOTE: JPM is NOT accepting ETF gold like GLD for collateral on futures contracts. They don't want paper on deposit either, ha ha ha, cause they obviously know first-hand that that crap is highly leveraged. :rolleyes:

crashjp
9th February 2011, 11:17
See what y'all think of this idea, the mourge is out of enough gold to hold their control of the market and this is a way to hold on to the control for a bit longer.

Mighty Moose
10th February 2011, 15:28
....thanks Davincij


http://www.youtube.com/watch?v=rhqVsTCrfMw

Here's the attached link provided by him in his video: http://www.reuters.com/article/2011/02/07/jpmorgan-gold-idUSLDE7161IO20110207

kvanar
10th February 2011, 21:31
Was laughing so hard, it was difficult to do a proper facepalm. :-P




....thanks Davincij


http://www.youtube.com/watch?v=rhqVsTCrfMw

Here's the attached link provided by him in his video: http://www.reuters.com/article/2011/02/07/jpmorgan-gold-idUSLDE7161IO20110207

What is Truth?
10th February 2011, 21:34
....thanks Davincij


http://www.youtube.com/watch?v=rhqVsTCrfMw

Here's the attached link provided by him in his video: http://www.reuters.com/article/2011/02/07/jpmorgan-gold-idUSLDE7161IO20110207

Really, JPM isn't accepting the ETF gold? Has to make you think doesn't it????