In Ted Butler's Archive


Following nearly two months of a protracted (and orchestrated) price swoon, the price of silver rose last week. The silver/gold price ratio tightened by more than 3 full points to under 71 to 1. The ratio sits at the lowest levels of the range and threatens to move much lower (silver outperforming gold).

It’s no secret that I favor silver over gold for a variety of reasons, including silver’s utility value and the puny amount of investment money needed to impact the price. Silver has performed much better relative to gold from the end of January to last week.

Gold fell $160 from the January highs, while silver fell $3. On a gold price decline of that magnitude, I would have expected a much bigger price beating in silver. There are a number of explanations, mostly centered on how utterly stupid cheap silver had become, both in absolute terms and relative to gold and other commodities.

We may be at a point where silver may truly accelerate to the upside. Based upon market structure the bottom in silver may be in. Therefore, what will the ensuing rally look like?

For a variety of reasons, including expecting it for many years, I’m inclined to view this budding rally in silver as the big one. In any event, that’s how I plan to handle it with little thought given to selling, no matter how far the rally may extend. I will only get defensive if the commercial crooks on the COMEX dramatically increase their manipulative concentrated short position as the rally continues.

New and aggressive short selling by the COMEX’s largest commercials has always been needed to cap price rallies. That same equation exists today, but what has changed is that the price of silver has been in the dirt cheap category for too long and JPMorgan is fully positioned on the long side of physical silver. A sharp upside move in silver will benefit JPM immensely.

At this point, there still appears to be a great skepticism about the rally. At least this advocate isn’t skeptical. Someday, this silver price manipulation will end and it will then be obvious to all just how stupid cheap the price had become. Of course, the big money will be made by those who recognize this before it occurs.

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