In Jim Cook's Archive


For the most part, the financial markets and the media don’t have much good to say about gold and silver. In our modern era of Keynesian economics, gold is often considered to be a relic of the past. A much smaller contingent of the populace has good things to say about gold. They point to the rapid expansion of money and credit as an economic danger that must be hedged against with gold and silver.

We certainly agree that precious metals make the best hedge against currency debasement brought on by reckless government spending and debt monetization. When the government is forced to create vast quantities of new money to pay its bills, a hedge becomes necessary. However, that’s not our main enthusiasm for silver and gold. The big thing for us is to make a lot of money for ourselves and our clients by owning silver. Hedges are fine, making a huge profit is better. We have closely analyzed the research of silver analyst Theodore Butler and we expect that his bullish price projections will ultimately prove correct. If he is right, it’s entirely possible for silver to appreciate 10 times or more.

One thing and one thing only stands in the way of these expected gains. Futures market trading sets the daily price for gold and silver. A battle is going on between the longs and the shorts that dwarfs anything seen before. The open interest or the amount of metals held both long and short has climbed to 1.1 billion ounces of silver and 68 million ounces of gold. On the short side are eight major banks and brokers who hold the price down and try to push it lower. On the long side are the technical hedge funds who manage money and perhaps a recent major buyer called the “silver whale.”

Hidden behind them like the Wizard of Oz (until Mr. Butler pulled the curtain back) lurks JPMorgan with the largest private hoard of silver ever accumulated and a lot of gold. JPM has 160 million ounces of silver in their COMEX warehouse alone and that’s more silver than the Hunt brothers owned in 1980. Plus, as Mr. Butler has shown, they own a lot more.

If the build-up in buying silver and gold by the longs continues, the shorts could be overrun and the price set free. If JPMorgan stands aside and no longer participates on the short side, the price would likely explode. The thing that makes one think that JPMorgan will eventually leave the other shorts behind is that they own so much physical silver and gold. Why continue to hold the price down when the financial rewards from a price rise are so enormous? That eventuality is the reason to own silver. When it happens JPMorgan and everyone else who owns silver will be a lot richer.

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