JPMorgan holds massive gold derivative short position that could be larger than the bank’s total assets, top money managers warn

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    by Ethan Huff, DC Clothesline:

    Should the price of gold ever shoot up from its current price by, say, another $1,000 in the coming weeks or months due to an unexpected “black swan” event, banking giant JPMorgan Chase would more than likely find itself underwater due to the massive gold derivative short positions it currently holds.

    Dr. Stephen Leeb, one of the world’s top money managers, says that JPMorgan’s gold derivate short positions are so numerous and large that they likely exceed the entirety of the bank’s assets on hand – which is a very dangerous position in which to be.

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    “What I lose sleep over is how much exposure does a bank like JPMorgan have to the [gold] derivative market,” Leeb is quoted as saying, adding that it is an “open secret” in the gold market that JPMorgan is heavy in gold derivative short positions.

    “This is not fraudulent, but it’s an open secret. In fact, it’s no longer a secret because they’ve been penalized so much for it. They’re trying to control the price of gold.”

    If the true price of gold is ever discovered, corrupt banks like JPMorgan will be no more

    When a stock or commodity is short sold, the short seller is on the hook for delivering that stock or commodity at a later date. The goal is to make a profit between the current price and a future lower price.

    In this case, JPMorgan appears to be selling the precious metal short using derivatives, which is effectively keeping the price of gold artificially low. Will the banking giant ever be forced to deliver or cover these extravagant short positions?

    “I mean, when you sort through all of these derivatives, what’s JP Morgan’s short position [in gold]? I can imagine it being much more than the assets in the company,” Leeb added.

    “And if gold takes off and it gets out of control, then it’s ‘Katy, bar the door.’ You don’t know what is going to happen. So that’s the real threat in my opinion.”

    Leeb says he doubts that JPMorgan as a company even knows how much of a threat its short positions are to its book. After all, a short position comes with unlimited risk, meaning the bank could be in serious trouble once the true price of gold is discovered by the markets.

    “I doubt that JPMorgan even knows how much of a threat it is, but they’ll find out if all of a sudden you see the price of gold shoot up $1,000. But this is a vicious circle because when gold gets set to move, and it’s creeping up toward all-time highs,” it essentially gets driven back down by the big boys like JPMorgan through shorting.

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