China "Hunt Brother" Takes On JPMorgan

Somebody has been buying Silver and Gold in China on the SFE using futures and in many instances has been demanding delivery of physical upon expiration. The buying cohort is frequently called "Shanghai traders" which includes local traders, funds, and banks operating on that exchange. However, there has been one futures trading firm at the forefront of this cohort named Zhongcai Futures. Within that firm, there is one person who governs their trading decisions,Bian Ximing The counterparty to these trades, according to China data providers is none other than JPMorgan.

This has not been officially confirmed yet, but has been corroborated by multiple (related) sources. It would seem slightly hyperbolic to name JPM as the sole counterparty, especially if these were futures trades. Futures trading does not match up one to one. But OTC and physical does match up.

An insider revealed to Cailianshe that Zhongcai Futures likely made more than 5 billion yuan in the last gold and silver surge, potentially exceeding 10 billion yuan. Additionally, Tiantian Fund Network data shows that as of April 3, the net value of Zhongcai Futures' "Zhongcai Youyilian" No. 2 asset management product was 2.63 yuan, up 426.44% since its establishment and 100.3% since the beginning of the year.

Therefore it does seem possible (we would say likely) that a western Bullion bank or Bullion banks had been called to deliver metal that went from SFE to SGE over the last 8 months or so. We had reported as much back in October of 2023 before anyone else.

In the GoldFix November exclusive entitled China Took Delivery of US Based Gold Last Month, we stated the following:

Over the last month or so, China has been taking delivery of Gold out of New York presumably related to the Shanghai Premium. We’ve believed this for some time, knowing that JPM and others have strong banking relationships and would be able to effect such a transaction. We also had no evidence of it except the drawdown in China followed by a drawdown in US Comex.

But now I can say here, that two unconnected sources confirm the delivery of Gold in China from the USA taken by a Bullion banks with Comex access.

This Zhongcai /Bullion Bank connection  would also behaviorally explain some of the drawdowns in Comex, LBMA, and the raid on US ETFs these past months. We'd also speculate it explains the massive intermittent negative gamma  Bullion banks have carried from OTC deals for the past year or so.

Here is that story as reported in China, translated by GoldFix, and re-edited for terminology and idioms

Story Players:

1. Cailianshe- reporter Chen Kandi
2. SGE/SFE- exchanges publishing data
3. Zhongcai Futures- entity discussed
4. Zhongcai Youyilian- fund controlled by entity
5. Bian Ximing- majority holder and personal operator of the ZY fund
6. JPMorgan- the reported counterparty

According to data from the Futures Exchange, Zhongcai Futures led the market with 57,200 lots of gold positions, roughly equating to 57 tons of gold as of April 26. On April 11, they also held 57,200 lots of silver from the Shanghai Futures Exchange, with futures long orders reaching 54,000 lots, ranking third in the market.

An insider revealed to Cailianshe that Zhongcai Futures likely made more than 5 billion yuan in the last gold and silver surge, potentially exceeding 10 billion yuan. Additionally, Tiantian Fund Network data shows that as of April 3, the net value of Zhongcai Futures' "Zhongcai Youyilian" No. 2 asset management product was 2.63 yuan, up 426.44% since its establishment and 100.3% since the beginning of the year.

"After November 2022, Zhongcai Futures continued to build long positions in gold and silver, with JPMorgan Futures as the counterparty of the short positions," said Wang Lei, a certified intermediate gold analyst at the Shanghai Gold Exchange.

Chart via Bai Xiaojun

In early 2023, as the US economy strengthened, gold prices dropped significantly, leading to a retracement in Zhongcai Futures' positions and challenges for their "Another Lotus" No. 1 product.

Zhongcai Futures returned to the bull market by early October last year, rapidly building long positions in gold and silver contracts until they began taking profits in late March this year. In recent months, they've started building long positions in various gold contracts again.

Data from the Shanghai Futures Exchange shows that as of July 9, Zhongcai Futures ranked prominently in several far-month gold contracts, holding a total of 31,000 long positions across all gold contracts, equivalent to a margin of approximately 20.7 billion yuan, or about 31 tons of gold. They also held significant long positions in silver futures contracts.

Wang Lei noted that gold still has room to rise in the second half of the year. Since April 15, the price of gold has fallen more than 22 yuan per gram, with over 10 billion yuan leaving the market. He believes the factors supporting gold's upward trend remain, including the potential for Fed rate cuts in the third quarter, which traditionally have a significant impact on gold prices. Geopolitical risks, trade frictions, and exchange rate issues also provide strong support for gold's continued strength.

Story: Translated from the Chinese by GoldFix and re-edited for idioms

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