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.
"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."
(Related: Last summer, we reported that JPMorgan was found guilty of "spoofing" trades and rigging precious metals prices.)
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.
Leeb has a show through King World News that you can listen to if you would like to learn more. Suffice it to say that mega-banks like JPMorgan are playing with fire via excessive shorting that could sink them into oblivion were the right financial circumstances to transpire.
"Have you ever wondered why gold never gets above $2,000, and silver never goes to $30 or beyond? Because of massive short positions that keep their prices down," one of our readers noted in the comment section about this matter.
"How do they maintain these massive short positions? Because the Fed is bankrolling it through its 'primary dealers' – the megabanks that de facto control the Fed."
The latest news about what appears to be the impending collapse of the current global financial order can be found at Collapse.news.
Sources for this article include: