In Ted Butler's Archive


I’d be hard pressed to make up a more bullish market structure than what was published in this week’s (December 16) Commitment of Traders Report. JPMorgan has dramatically reduced their short position by 15,000 contracts or the equivalent of 75 million ounces. They were short 40,000 contracts only a few weeks ago, or 200 million ounces. The 25,000 contracts they have remaining may be reduced further in next week’s COT report. I estimate they have 675 million physical ounces of silver that they have accumulated over the last 7 years while holding the price down with their COMEX paper shorts. When we subtract the 25,000 contracts they have left, that reduces their silver total holdings by 125 million ounces leaving 550 million ounces of silver. This is the largest net amount of silver that JPMorgan has ever held.

Meanwhile, the bank has taken delivery on 13.5 million ounces of COMEX silver this month alone. The favorable low price of silver has also seen a big reduction in the short position on the exchange traded fund which is probably more of JPMorgan’s maneuvering. Nothing could be more bullish for the future price of silver than to have JPMorgan cover this many paper shorts and to continue to accumulate physical silver. It’s manipulative and contrary to commodity law but the regulators don’t seem to notice.

The dramatic and bullish positioning changes in COMEX silver indicate to me that it is only a matter of time before silver is substantially higher in price. And if JPMorgan fails to go short again then this will be the one that we’ve all been waiting for. JPMorgan’s physical silver position has grown so large (over 650 million ounces) the bank can make billions on a silver rise. Every $1.00 jump in silver will make JPMorgan $6½ billion. A rise to $100 an ounce (which is probable) would make JPMorgan’s physical stash worth $65 billion (minus a much smaller loss on its shrinking paper short position). It is in JPMorgan’s best interest that the silver price rise and by a lot. Silver is incredibly cheap right now given the market factors that argue for an explosive price surge. As always it’s much better to own silver early than a day to late.

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