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JP Morgan Makes the Case for Gold Bullion

May 23, 2012 - Less than nine months after the very serious bankruptcy at MF Global, yet another major American bank has engaged in overly risky trading that has led to major losses and highlights the need for investors to take their money out of the reach of banks and put it into gold and silver.

Gold fell more than 2 percent after a US home sales report brought better than expected news to the markets and signaled a sell-off. Prices in gold were as low as $1,534.25 per troy ounce, or 2.15 percent decline. This is generally in line with the correction in the gold market that will bring the prices lower, making gold more affordable.

The more affordable prices in gold are perfect timing for the current fracas at JP Morgan. The too-big-to-fail bank headed by the notorious Jamie Dimon has made a bad bet in the derivatives market, which is the absolute antithesis of gold. Derivatives have no underlying or intrinsic value whatsoever and are thus “derivative” of value. Because of this dynamic, there can be more derivatives in existence than we can possibly buy, sell, or trade, and this makes them extraordinarily hazardous to the global economy.

There are an estimated $707 trillion derivatives in existence as of the first quarter of 2012, which is only the Gross Domestic Product of the entire planet for 11.2 years. This is extraordinarily disproportionate to the market and a great threat.

Dimon’s bank must deal regularly in derivatives in order to achieve returns in the current environment, and clearly he isn’t hedging the bets with gold bullion. Banks are being forced to make these risky bets in order to chase diminishing returns that under typical market circumstances shouldn’t be better than when the economy was healthy and functioning.

What was $2 billion loss by JP Morgan is now being reporting The Independent as closer to $7 billion, which would be in line with bank losses at MF Global where less than half of the ultimate loss was originally reported.

Gold bullion is the only way out of this banking mess. It takes your money out of the reach bankers, particularly if you hold the bullion yourself, and it takes power away from bankers who can’t help but hurt. Gold bullion is the way forward.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org

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