Yesterday we reported that ZeroHedge via excellent investigative journalism had discovered the top-secret location of JP Morgan’s London gold vault- namely 60 Victoria Embankment.
Numerous SD readers have inquired as to the significance of the story, and why the discovery of the specific location of JP Morgan’s gold vault should matter to precious metals investors (or to JP Morgan for that matter).  The answer as to why this is so significant for JP Morgan lies in rehypothecation.

Once a precise location, holding specific goods can be pointed to by a creditor, the creditor will quickly seek a Writ of Attachment.  The gist of receiving the writ for JP Morgan is: “Hey, turn over this specific XXX to the court, so the court can give it to the proper owner; and don’t you dare move it until the court says OK.

All diehard gold bugs suspect, of course, that through leases, derivatives, futures and [etc], JP Morgan has geared the bejezus out of the bullion, regardless of who the legal owner(s) are, regardless of whether the gold is supposedly allocated or unallocated (think MF Global).

So the thought that JP Morgan might have to send its legal team in to court to do battle with barbarians at the gate – the 120 banks looking for assets – is juicy. And a true headache for JP Morgan, because if or when it happens, JP Morgan no longer controls the situation.

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