Why is JP Morgan Hoarding Silver?

By: Treasure Coast Bullion Group - 

JP Morgan, the largest U.S. commercial and investment bank, is increasing its stockpiles of silver, betting that prices will move higher as inflation begins to take hold.  Silver historically outperforms during the latter stages of a growth cycle and with interest rates on the rise, silver prices are poised to outperform riskier assets.  While hedge fund traders are short futures and options position according to the latest commitment of trader’s report, JP Morgan is increasing its inventory, betting that prices will eventually surge higher.

JP Morgan Chase

JP Morgan is the largest investment and commercial bank in the United States. The company was created from the Merger of Chase Manhattan Bank and JP Morgan Chase Bank. Prior to this merger, Chase had merged with Chemical Bank and Manufacturers Hanover Bank.  The company is also one of the largest silver traders in the world. The company holds stockpiles of silver in its regulated vaults.

JP Morgan is Hoarding Silver

Since January of 2018, JP Morgan Chase has increased its silver stockpiles by slightly more than 20 million ounces to 139,122,953 ounces in its regulated facility. JP Morgan Chase now owns 53% of the total 261 million ounces of silver held in vaults.  In addition, it appears that JP Morgan is increasing stockpiles as hedge funds are neutral. According to the latest commitment of trader’s report, open interest that is held by managed money is balanced.

Why is JP Morgan Hoarding Silver?

JP Morgan Chase is adding to its stockpiles because the company believes that prices will climb higher. There are several reasons why the company believes prices will climb.  The first is that we are near the end of an economic cycle where interest rates are climbing to fend off increasing inflation. The second is that geopolitical risks have created more volatility in riskier assets such as equities. 

Current Market Environment

There are 3-major issues that are affecting the backdrop of the global macro environment. The first is that inflation is rising, and the Federal Reserve is raising interest rates. The second is that despite some signs of peace in the Koreas, the White House is now focusing on its nuclear agreement with Iran.  Lastly, the Trump Administration is hell-bent on installing trade tariffs, which could increase market volatility and uncertainty.

Silver is Declining Relative to Inflation

While inflation is beginning to pick up which generally occurs as the end of an economic cycle, silver prices are stuck in a relatively tight range.  Inflation can be measured using several economic indicators, but one of the most popular is the consumer price index. The CPI index for all urban consumers is an index that measures inflation at the consumer levels. This compares to the producer price index (PPI) which measures inflation at the producer level.


A chart of silver prices divided by the CPI shows that silver prices are on the decline relative to consumer inflation.  The historical long-term average of Silver prices dived by the CPI is closer to 0.90, and when inflation accelerates as it did in 1980’s up to 10% silver prices reached the $49 per ounce mark.  This produces a ration of nearly 3.0.

Summary

JP Morgan, one of the largest and most widely respected investment and commercial banks, is adding to its Silver stockpiles. It appears that the bank is speculating that silver prices will rise as geopolitical events and trade tariffs increase volatility.  JP Morgan has increased its stockpiles by approximately 19-million ounces in the past 3-months, speculating that prices will soon rise. 

If you are looking to take advantage of a time to add precious metals to your portfolio, click on this link to get access to your Investment Kit or better yet, give us a call today at 800–982–6105.  

Good Investing,

Treasure Coast Bullion Group



 

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