In Ted Butler's Archive


A couple of weeks ago, a subscriber pointed out that I seemed to be speculating that JPMorgan was the big buyer of Silver Eagles and had accumulated as many as 300 million ounces of silver. The subscriber noted that I usually relied on facts that could be documented. I believe there are sufficient facts that point to JPMorgan having amassed the largest physical silver position in history.

JPMorgan took over Bear Stearns and its concentrated short position in COMEX silver (and gold) in March 2008, when silver was close to $21. That was the highest price level in 28 years. The price fell in an irregular pattern until late 2010, while JPMorgan both decreased (bought back) much of its concentrated short position on sharp price declines and increased its COMEX silver short position on rallies, as I publicly chronicled all along. At times, JPMorgan’s COMEX net short position exceeded 40,000 contracts or the equivalent of 200 million ounces. Such a large concentrated position necessarily controlled the price of silver and was manipulative on its face.

JPMorgan profited handsomely on its COMEX manipulation through 2010. However, in late 2010, investor demand for physical silver caused silver prices to break above the highs of early 2008 and JPMorgan could no longer control the price of silver through excessive paper short selling on the COMEX. Physical silver conditions tightened so much by the end of April 2011 that the price reached nearly $50 and, quite literally, JPMorgan (along with other collusive CME traders) were staring into a financial catastrophe, similar to what undid Bear Stearns three years earlier.

The bank along with interested parties at the CME Group arranged for a disorderly takedown of silver prices, almost assuredly with the approval of U.S. regulatory officials. The takedown proved successful and the big shorts, particularly JPMorgan, escaped what would have been an epic financial catastrophe had they been forced to cover their massive silver short positions.

At the time of JPMorgan’s near catastrophe the bank evidently realized just how limited the supply of silver was and decided to buy as much physical silver as it could. Since April 2011, the U.S. Mint has produced and sold 140 million Silver Eagles. I estimate that JPMorgan purchased close to half of these 140 million Silver Eagles. According to very reliable sources on the retail front, investment demand has been lower over this time, as retail buyers do not buy strongly into a declining price. Yet we know for a fact that there has been extraordinary buying of Silver Eagles.

JPMorgan commands an army of lobbyists and can exploit U.S. law and regulations. JPMorgan knew that U.S. law dictated that the Mint must produce enough Silver Eagles to meet demand. That law was never intended to allow a single big buyer to demand such an extraordinary number of Silver Eagles.

It’s the perfect crime – JPMorgan sets the price of COMEX silver and then demands as many coins as the Mint can produce. When JPMorgan increased its COMEX short position last summer, assuring that prices would drop, sales of Silver Eagles nosedived temporarily. Sales only resumed after prices were brought lower by this crooked bank.

When JPMorgan took over Bear Stearns in 2008, its Manhattan precious metals warehouse was not operating. But in May 2011, after the apparent decision to accumulate physical silver, the warehouse was activated as a working COMEX-approved silver facility. After starting with zero silver inventory that warehouse has grown to nearly 50 million ounces, the largest of all six COMEX warehouses. The most compelling reason to start a warehouse would be to store silver you owned rather than to pay some other warehouse.

In 2012, as the custodian for the metal held in the big silver ETF, SLV, JPMorgan physically transferred 100 million ounces of silver it was storing in one of its own London warehouses on behalf of the trust to Brinks as a sub-custodian. In hindsight, the most plausible explanation was to make room for silver JPM would purchase by using the SLV as a means of acquiring physical silver on an unreported basis, by avoiding the SEC’s 5% share ownership reporting requirement. I believe much more than 100 million ounces of silver, perhaps double or triple that amount has been accumulated by JPMorgan using the SLV to transfer metal to its own London warehouses completely undetected and unreported.

Then there is the matter of the unprecedented physical turnover in the COMEX warehouses. This unusual turnover began in April 2011. This timeline further supports the decision of JPMorgan to begin acquiring physical silver. It is in complete harmony with my conclusion that the unprecedented COMEX warehouse turnover is to due to tight conditions and that the tight conditions are mainly due to JPMorgan’s accumulation of physical silver.

Back in the late 1970’s the Hunt Brothers accumulated close to 100 million ounces of physical silver (and more in futures contracts) and were found to have manipulated the price of silver higher. What makes the much larger accumulation of physical silver by JPMorgan today different is that it is the perfect crime. The Hunts were outsiders; JPMorgan is the ultimate insider. The Hunts ran afoul of the regulators; JPMorgan owns the regulators. The Hunts’ purchases were widely known, whereas I’m the only one pointing to JPMorgan accumulating massive amounts of physical silver. The Hunts drove prices higher as they accumulated silver. JPMorgan, by virtue of its price control on the COMEX, has been able to accumulate silver on sharply declining prices. Talk about a stacked deck.

Since JPMorgan has been accumulating silver for more than three years, its average price is considerably north of current prices. Back-of-the-envelope calculations indicate an average price in the mid-$20’s and any profit to the bank would only accrue above those levels. Yes, it grates on me that JPMorgan has been able to illegally accumulate as much silver, but at some point the accumulation should prove greatly beneficial to silver investors. JPMorgan intends to sell at extremely high silver prices.

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