In Ted Butler's Archive


The latest COT report indicates that my premise about a possible change in behavior by managed-money traders in COMEX silver is still alive. For decades, the traders in question relied strictly on price movement to trigger their buy and sell transactions, basically, buying as prices rose and selling when prices fell. Not only did this activity accentuate price moves, the traders in question grew so large that their actions came to determine big price moves. These technical hedge funds known as managed money traders became their own worst enemies. Prices generally topped out when they exhausted their collective buying and bottomed out when their selling was exhausted. Of course, the conniving and collusive counterparty banks, led by JPMorgan, took full advantage of the herd-like managed money behavior every step of the way.

Late last year, after the largest managed-money fleecing on record in COMEX gold and silver, something very unusual occurred – for the first time in years, an expected buildup of managed-money short positions in COMEX silver futures didn’t take place. I had been focusing on this expected buildup, explaining that were silver prices to decline sharply, then it would be this managed-money shorting that drove prices lower. The expected selling (estimated at around 25,000 contracts) never occurred and, accordingly, prices didn’t decline into dramatic new lows. I speculated at the time that the managed-money traders must have collectively ignored the usual mechanical signals to sell, sensing it would be a bad deal to sell silver short at such low prices.

After gold and silver prices bottomed out near the end of December, another unusual phenomenon occurred. On the subsequent price rally early in the new year, there was a large buildup in managed-money long positions in COMEX silver. From the end of December 2016, managed-money long position had grown by more than 35,000 contracts (175 million ounces) as silver prices rose by nearly $3. Silver has now fallen more than $1.50 over the past two weeks, penetrating all the important moving averages on the way down, a price event that has always resulted in massive managed-money selling in the past. However, that hasn’t happened as the managed-money traders only liquidated 15,000 contracts.

Should the newly added managed-money silver long positions not get sold on lower prices, then the dynamics of the game will change. Without the technical funds to toss around like ragdolls, there is no game for JPMorgan and the other commercials. The 20,000 contracts of new longs shouldn’t be viewed in isolation but as an addition to the core non-technical fund managed-money long position of 60,000 contracts. And to that 80,000-contract tightly held managed-money long position, one must add at least another 30,000 long contracts held by the other traders. Simply stated, there may now be a true “core” long holding in COMEX silver of 110,000 contracts amounting to 550 million ounces of silver. (Not to be confused with the 550 to 600 million ounces of real silver held by JPMorgan).

If the bulk of the 550 million ounces core silver paper COMEX long position is held by traders not inclined to sell on lower prices, then under what circumstances will the position be sold? The obvious answer is on higher prices. Therefore, it becomes a waiting game to see when those higher prices will occur. It also focuses attention on who is on the opposite side. In derivatives, there must be a short for every long. The direct answer to who is short is the 8 largest shorts on the COMEX, which hold more than 100,000 net contracts short or more than 500 million ounces.

But one of those 8 large short traders, the criminal enterprise also known as JPMorgan, has taken measures to offset its own leading COMEX paper short position in silver by amassing a physical silver hoard larger than the world has ever seen. It took six years for JPMorgan to acquire its near 600-million-ounce physical silver stockpile. Holding a 600-million-ounce physical position provides more than ample protection against their 150-million-ounce paper short position. However, the same cannot be said about the remaining 7 large COMEX silver shorts. These remaining short paper traders have no protection against rising silver prices, making them terribly vulnerable to higher prices.

None of the other commercials on the COMEX appear to have acquired physical silver in any way and, therefore, would appear to have no protection against rising silver prices. This is a very big potential problem for the 7 large shorts (and all other more innocent shorts). Based upon the near complete absence of evidence of physical silver accumulation by anyone other than JPMorgan, I am inclined to believe the 7 large COMEX commercial shorts, mostly foreign banks, don’t have a clue as to the potential danger they face. Oh, they probably know that they have been engaged in a crooked game of skinning the technical funds, but I don’t think they know just how big of a hole they have dug for themselves.

The history of epic financial miscalculations is replete with examples of complacency, particularly concerning banks and derivatives trading gone amok. Take the Bank of Nova Scotia, for example, thought to be a very large COMEX silver short. I’m convinced senior management of Scotiabank doesn’t have a clue as to what a potential financial disaster a handful of its traders has put them in. Besides, the whole idea that banks would be the largest speculators in leveraged silver derivatives trading is absurd to begin with. Let me keep this simple – if great numbers of managed-money silver long positions are not liquidated and soon on lower prices, I believe we will soon find out just how vulnerable the 7 big commercial shorts will be on higher prices. I am also certain that these 7 big COMEX silver shorts will not go down without a fight and that means continued attempts to rig prices lower in the attempt to trip off managed-money selling. But if those manipulative attempts fail because the managed-money traders have decided to hold and not fold, that will soon be visible in sharply rising silver prices.

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