In Ted Butler's Archive


There doesn’t appear to be any let-up in the persistent movement of silver in and out of the COMEX-approved silver warehouses. This week, an astounding 5.8 million ounces of silver were physically moved in and taken out. Annualized, this comes to more than 300 million ounces, truly an extraordinary amount of silver. Anything turned over to such an extent has to be experiencing extreme demand.

The big silver ETF, SLV, as of June 30, added 5.5 million shares (ounces) to the short position. At 19 million shares, the short position in SLV represents 5.7% of total shares outstanding. The short sellers were unable (or unwilling) to secure physical silver to deposit. In addition some 10 million ounces of physical silver was removed from the trust for some unknown purpose.

The SLV prospectus requires that a strict amount of metal back each share outstanding. Since short sellers are, in effect, issuing unauthorized shares with no metal backing, the intent of the prospectus is being violated. Both the increase in the short position of SLV as well as the hefty withdrawals of metal point to physical tightness. Combined with the extraordinary level of physical turnover in the COMEX silver warehouses, it’s hard to imagine more compelling signs of wholesale tightness in silver.

That we do have such signs of tightness in both the COMEX silver warehouses and in SLV, the two largest silver stockpiles, begs the question –why aren’t those clear signs of tightness reflected in the price of silver? The answer, of course, is rooted in the numbers: whereas we are talking about tens of millions of ounces of actual silver moving in and out of the COMEX warehouses and SLV, we are talking about hundreds of millions of ounces of paper silver in COMEX futures trading.

Think of how preposterous is the circumstance I just described – purely speculative paper trading games on the COMEX dictating profits and losses to the world’s metals industry and investors. It’s easy to place the blame for this absurd and illegal circumstance squarely on the CFTC and the CME Group. These two regulators have sat by and allowed this dangerous situation to develop without an apparent concern.

If a physical silver shortage takes hold, all paper shorts are subject to annihilation in an upside melt-up. This will not reflect well on the regulators. Thirty years of price suppression and manipulation by our largest financial institutions must soon be rectified. The ramifications for the price of silver are truly exciting. Those who own physical silver will be rewarded. It’s an opportunity like no other and it will not come again.

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