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JP Morgan is Long on Silver

For those of you who do not know, JP Morgan (JPM) is holding the world’s largest stockpile of physical silver, having amassed over 750 million physical ounces. Over the last six weeks alone, JPM has accumulated more than 21 million ounces.

 

This brings a few questions to mind: How was JPM able to accumulate that much physical silver in such a short period of time? What funds did JPM use? And why would JPM do this?

 

From June to October 1, JPM sold off its 200-million-ounce paper short position, freeing up funds for physical ounces and leaving the financial institution with zero short contracts.

 

This is the first time in history that JPM has been long in both physical and paper silver.

 

It is also worth noting that JPM’s shift coincided with the U.S. mint saying that they ran out of coins.

 

What does this mean? JPM is setting itself up to capitalize on a potential massive movement to the upside.

 

This looks very similar to what the Hunt brothers attempted when they  “cornered” the silver market in 1980. Silver prices soared from single digits to a high of $48.70 in a very short time period. However, unfortunately for them, the brothers failed because they leveraged the family fortune into paper silver contracts rather than collecting the physical metal. The government noticed the paper manipulation and stepped in, after which the Hunt brothers had to declare bankruptcy and silver tumbled.

 

If the Hunt brothers would have amassed physical silver instead of collecting paper, the U.S. government would not have been able to step in, freeze their credit from the banks and require them to pay margin calls.

 

It seems JPM has learned from the Hunt brothers’ example and could be on its way to a massive squeeze on physical silver. If adjusted to inflation that was calculated in 1980, silver would be trading over $600 per ounce. Can it get there? No one can know for sure. But we do know that this is shaping up to be an interesting historical run for silver.

 

As a reminder, clients should possess 5-10% of assets in physical metal to help protect and “insure” their financial portfolio. Even Mad Money’s Jim Cramer will tell you that. However, with the current circumstances, investing 5-10% or more could prove to be more than just a wealth insurance policy.

 

Could precious metals go down further? Maybe. But compared to the upside, I wouldn’t try to time a few pennies one way or another. If JPM is successful with a massive squeeze on silver, waiting to position your clients in the metal could prove devastating. Historically speaking, when silver tends to move, it moves like a thief in the night. When that happens, there isn’t enough to go around and it’s too late.

 

Call us today to start positioning your clients for wealth insurance and potentially significant upsides. National Gold Consultants can help you speak to your existing clients about precious metals and draw in new clients using our proven strategies and tools, including: branded whitepapers, branded client whiteboard videos, client letters and gold and silver presentations/workshops.