The latest from Hathaway - Fair use............
<<Bullion banks expanded their short position in gold by dramatic proportions in the fourth quarter of 1999. Gold derivatives outstanding increased by a record $24.2 billion to $87.6 billion, the largest quarterly increase ever. These positions, reported by the Office of Comptroller and Currency, do not include activity of large non-US bullion dealers or investment banks. Including those entities, the OCC numbers should be ?grossed up? by 50% to 100%.
JP Morgan reported the largest exposure to gold derivatives, $38 billion, over 40% of the total. From June 30, 1999, JP Morgan?s total more than doubled, from $18 billion. It is possible that JP Morgan?s activity was part of a rescue operation for weaker bullion dealers. As the strongest credit among bullion dealers, it might have been called upon (or felt a calling) to shoulder some of the risk of weaker bullion dealer credits rattled by the gold short squeeze of September 1999. Perhaps JPM?s vast derivative expansion was a form of reinsurance, an assumption of a layer of risk to shore up the misadventures of their less competent competitors. The shutdown of the firm?s New York trading desk at year end 1999 and transfer of most trading operations to London is curious in these circumstances, and raises the question as to whether the objective was to distance these operations from US regulators. Notice that the new address is conveniently near the anti-gold British Exchequer.
The activities of the bullion dealers in general and JP Morgan in particular raise numerous other questions as to the impact these institutions have had on the behavior of the gold price:>>
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