JPMorgan holds tens of billions of dollars in gold in vaults in London, New York and Singapore. It is one of four clearing members of the London market, where global gold prices are set by buying and selling metal held in a few London vaults — including JPMorgan’s and the Bank of England’s.
JPMorgan is the biggest player among a small group of “bullion banks” that dominate the precious metals markets, and thanks to a recent US court case, and the internal documents presented by prosecutors we got a glimpse of just how dominant a role the bank has played and how the Gold market works. In 2010, for example, 40% of all transactions in the gold market were cleared by JPMorgan.
This is important because as I have said many times, the 50 times plus relationship between physical gold holdings and the various derivatives held against it means it is a highly manipulated market, which sits at the heart of the financial system.
So today we will look at the case, and how so called called “spoof” trades — large orders intended to manipulate prices that were quickly canceled works.
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