J.P.Morgan says Gold is Money! NO KIDDING J.P.!!!

February 09, 2011

Macro Trader Briefing #102: J.P. Morgan's Historic Golden Moment!
by Justice Litle



Quote of the Week

J.P. Morgan Chase & Co. announced on February 7, 2011 that it will accept physical gold as collateral for investors that want to make short-term borrowings of cash or securities... I don't recall the G-20 declaring gold a new currency. Yet JPMorgan Chase and a couple of financial market exchanges have effectively declared that gold is an alternative currency. In other words, gold is money...

~ Janet Tavakoli, Tavakoli Structured Finance

Market Commentary

Have you heard? Gold is now considered money.

It's not like this is a new development. Across continents and cultures, gold has been money for more than 2,500 years... ever since the Lydians started minting metal coins circa 650 B.C.

But for much of our modern age, the movers and shakers of global finance have considered gold a "barbarous relic" (as the economist J.M. Keynes so famously dubbed it). For decades gold had been considered obsolete... a source of jewelry and trinkets... a mere plaything for doomsayers and conspiracy theorists.

So gold has long been money for those in the know. But for the intellegencia and the populace, it was "just another metal."

But now, one of the most powerful banks on the planet – J.P. Morgan, whose market cap is more than double that of Goldman Sachs – has recognized the monetary value of gold.

As the WSJ reports,


J.P. Morgan Chase & Co. said it will allow clients to use the metal as collateral in some transactions. For example, a hedge fund wanting to borrow money for a short period can put up gold as collateral and use the borrowings to invest elsewhere, betting on making a better return. Typically, banks accept only Treasury bonds and stocks in such agreements.


By making the announcement, J.P. Morgan is effectively saying gold is as rock solid an investment as triple-A rated Treasurys, adding to a movement that places gold at the top tier of asset classes. It also is trying to capitalize on all the gold now owned by hedge funds and private investors that is sitting idle in warehouses.

Why did the house of Morgan do this? In large part, it simply makes good business sense. Many Morgan clients are sitting on large amounts of gold, and adding to those holdings on a long-term investment thesis. Why not let that gold act as collateral to finance additional transactions?

It's rather amusing that gold is now considered up to the snuff of "triple-A rated Treasurys." In a saner world, gold would be a no-brainer choice in comparison to U.S. government bonds. But change comes at the margins, and this is a big step in the right direction.

It's fun to think about timelines. August 15th, 1971 is a date that lives in infamy: This year, 08/15/11 will mark the 40-year anniversary of Nixon shutting the gold window.

One wonders: Will February 7th, 2011 go down in history as another "big day" on the golden timeline? The day that the money world's movers and shakers finally, grudgingly, accepted the intrinsic "alternative currency" value of gold?



In the aftermath of the Egyptian uprising – and the J.P. Morgan announcement, which has had far less media coverage than it deserves – gold has reversed its downtrend and is now re-challenging the 50 day EMA.

A short-term correction here, followed by a renewed thrust to short-term highs, would be a very positive development for gold...


We are approching the end of our paper money system. Many of you will be caught blindsided and enter the Greatest Depression empty handed. Start buying Gold and Silver for protection. There is still time. I would start with Silver as it is cheaper.