In Ted Butler's Archive

Only One Seller Left?

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

Another week, another data release from the CFTC proving manipulation in the silver market. The most recent Commitment of Traders Report (COT) provides additional compelling evidence that the COMEX silver market is manipulated. The new report proves manipulation so clearly, as to make it almost undeniable. In recent weeks and months, it appears that all the additional short sales of COMEX silver futures contracts are coming from one entity. If true, there could be no clearer proof of manipulation.

I am going to try to make this as simple as possible, but it does involve different facts and figures. It is very clear and simple to me, but that is because I have spent decades studying this data. I hope I can make it clear enough for both you and the CFTC to understand. This is not about whether silver is manipulated, as that’s a given. This is about whether I can explain and prove it.

The COT, for positions as of the close of business February 10, the total commercial net short position increased by 1864 contracts for the week. However, the net short position of the 4 largest traders increased by 2832 contracts. This means that of all the commercial traders, the only short selling came from the 4 largest traders, with all other commercial traders (the 5 through 8 largest traders and the raptors, the 9+) buying. This was very unusual, in that the commercials generally operate as one cohesive unit, all buying on the way down in price and selling on the way up.

Even more unusual is that this pattern has persisted back to the December 22, COT report. On an almost $2.50 rise in the price of silver since then, the total commercial net short position has increased by 4357 contracts, yet the big 4 have increased their net short position by 5396 contracts. This means all new short selling in COMEX silver has come from the biggest traders, for the first time in memory. That should be enough for any semi-alert regulator to conclude manipulation, as such concentrated short selling by so few participants should have every alarm and whistle blaring at CFTC headquarters. After all, there could be no clearer motive for such selling – the capping of price for the purpose of protecting already obscenely large short positions.

But even while it is easy to conclude that all new short selling is coming from the same four or less large traders, where do I get off suggesting it is one entity behind all the new silver short selling over the past 7 weeks? Here we have to look at another CFTC data source, the Bank Participation Report. Since the Bank Participation Report (BP) is a monthly publication, while the COT is weekly, we must make appropriate calibrations between the reports. The two most recent BP reports are as of January 6 and February 3. Using those two reports, plus the COTs of the exact same dates, this is what the reports show. Between those two dates, the COT indicates that the total commercial short position increased by 2253 contracts, with the big 4 category increasing by 2256 contracts, once again accounting for more than the entire increase in the commercial category.

The Bank Participation Reports corresponding to January 6 and February 3 indicate that the two U.S. banks increased their net short position by 2500 contracts in that same time period. This proves, at least during this specific period of time, that one or two U.S. banks accounted for more than 100% of all the commercial short selling and all the selling in the big 4 category. One or two entities, accounting for more than 100% of all total short selling for more than a month is manipulation. Period. It can only have occurred to attempt to cap the price and protect the existing short position.

Please remember that while I have been documenting the incremental changes in the concentrated short position of what may be one large trading entity, those changes are small compared to the total short position of this entity, which I estimate to be back above 30,000 contracts, or 150 million ounces. That’s more than 22% of the entire annual world mine production of silver. It is impossible for such a large concentrated short position not to be manipulative.

I’m fed up with the CFTC and their so-called investigation. They claim to be investigating , while the manipulation grows more obvious. I think we’ve passed the point where we can eliminate incompetence as the explanation for their inaction. I have a good idea of what is behind their refusal to right a very obvious wrong, although I won’t get into those details here. Let me just remind them that while they may fear the possible ramifications of a truly free silver market, after decades of manipulation, the greatest damage is their abandonment of the rule of law.

(Editor’s note – here’s a detailed report of Ted Butler’s past and present dealings with the CFTC regarding the silver manipulation – )

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