The eight largest shorts on the COMEX hold 320 million ounces of silver futures net short, or an average of 40 million ounces each. Many assert that the giant concentrated short position is just a hedge. The eight largest silver miners in the world produced 255 million ounces of silver. There are only 5 companies that produce more than 30 million ounces or more per year and they have the lowest level of miner hedging in a decade. What mining company in its right mind would lock in sub-$20 silver? So if the world’s largest silver miners haven’t hedged their production, what is the legitimate economic explanation for the concentrated COMEX short position?
The concentrated short selling in COMEX silver is not a legitimate hedge against actual silver or silver derivatives. Rather, it is a clear attempt to dominate and control price. The 320 million ounces silver short position held by eight traders represents 25% of all the silver bullion in the world (1.3 billion ounces). This concentrated short position is in the form of futures contracts and that also means there are 320 million ounces held long, by many more than 8 traders. There is no equivalent concentration of the long side of COMEX silver. In fact, the concentrated short position in COMEX silver is more than 55% larger than the concentrated long position, perhaps the biggest mismatch between big longs and shorts in any regulated futures market.
Without the 320 million ounces held short by 8 traders, the price of silver would be significantly higher by multitudes of the current price. That’s because there is no one willing to change places with the big silver shorts at anywhere near current prices. There is no replacement of the big 8 silver short position except at much higher prices. Sure, some miners and speculators may be willing to go short at $30, $40, $50 or higher; but not at $20. That’s the ultimate proof that silver is manipulated. The big 8 shorts hold a position that can’t be liquidated or passed on at current prices. They are stuck, pure and simple.
Being stuck provides the incentive for continued price control and explains why silver prices don’t rise. It also creates great danger to the orderly functioning of the silver market and highlights how the regulators at the CFTC and the CME have been grossly negligent for not moving against it. The concentrated short position could lead to a COMEX shutdown. However, the concentrated short position has also created the investment opportunity of a lifetime. The 8 largest COMEX shorts did not intend to create this opportunity. It may be the greatest unintended consequence in the history of financial markets. Someday when this price fixing ends, it will be the biggest explosion in history. An increase in the demand for physical silver is all it takes to squeeze the shorts. The combination of industrial demand and investment demand makes a huge price rise inevitable. Have patience with silver, the day of reckoning lies ahead.
For subscription info please go to www.butlerresearch.com