In Ted Butler's Archive


Cook: Explain what’s going on in the gold and silver market.

Butler: The first thing to understand is that world prices for gold and silver are set in New York on the COMEX. This paper trading dictates the price. Other factors such as the dollar, European bank problems, the Chinese economy or what have you have little or no bearing. You hear every reason under the sun for price movement, but it’s never anything other than the big banks and hedge funds fighting it out on the COMEX.

Cook: What about supply and demand factors?

Butler: Forget it. Eight big banks including JPMorgan monopolize the short position in gold and silver. These eight commercials, as they are called, have a concentrated position that amounts to over 84% of the overall short position in gold and 100% in silver. You can see all of this in the Bank Participation Report, and the Commitment of Traders Report published by the government.

Cook: So who is on the other side?

Butler: This would be the technical hedge funds who fall under the managed money category. They have 75% of the futures contracts that are long. They are purely driven by computers. As a general rule, they buy when the fifty-day moving average is penetrated to the upside and sell when it’s penetrated to the downside.

Cook: What’s been the history of this battle between giants?

Butler: The big banks have always won. They have made billions on the short side.

Cook: Why would hedge funds keep losing money to them?

Butler: This only happens in silver and gold. The big banks don’t trade much in the other commodity markets. The hedge funds do better in the grains and other commodities.

Cook: So if the big banks are going to win again as they usually do, the price must fall.

Butler: Exactly.

Cook: Could it go the other way?

Butler: It’s possible the big banks will be overrun and the price escalate. It’s going to happen one of these days.

Cook: Why?

Butler: First of all it’s crooked as can be. The public spotlight is on JPMorgan as never before. Plus they have accumulated a gargantuan hoard of physical silver which they will make a fortune on when silver goes up.

Cook: How much silver?

Butler: I think I’ve traced close to 500 million ounces. Think how much they make on a $10 rise in silver. This potential profit suggests they will soon exit their big paper short position and quite possibly leave their partners in crime hanging. These other big banks could get shellacked in such a double-cross.

Cook: So, what should investors do if silver drops?

Butler: I would say buy with both hands. Anything you get under $20 is the buy of a lifetime. There’s not much silver left above ground, so short term price swings are not nearly as important as getting a full position.

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