In Ted Butler's Archive


JPMorgan has accumulated more than 500 million ounces of physical silver over the past five and a half years. Just this morning I was asked why wouldn’t JPMorgan work to create higher prices considering its large actual silver holdings? That’s a great question and one day soon, JPMorgan will undoubtedly press silver prices higher. But right now JPMorgan is also short around 23,000 COMEX silver futures contracts, the equivalent of 115 million ounces and lower prices will enable the bank to buy back many of those short contracts at a profit. You could say JPMorgan is playing both sides of the street. But it’s more than that because it is a lot easier for JPMorgan to buy back paper short positions than it is for the bank to buy additional ounces of actual silver.

For example, over the past two reporting weeks, the data indicates to me that JPMorgan bought back 10,000 paper silver short contracts, the equivalent of 50 million ounces. There is no way in the world that any entity could buy 50 million ounces of actual silver in two weeks without causing prices to explode. That’s 3 full weeks of total world production. Yet JPMorgan bought 50 million ounces of paper silver in the past two reporting weeks alone on sharply lower prices. That’s the difference between paper and physical – what can be done in the COMEX paper market bears no resemblance to what can be done in the physical realm.

JPMorgan is capable, of course, of double-crossing the other commercial shorts and allowing silver prices to rise because it holds so much physical silver. But I don’t know how to predict that beforehand. The most plausible path is for JPM to buy back as many short paper contracts as possible before allowing the price to rise in earnest. That buy-back must occur with lower prices accompanied by aggressive managed money (computerized hedge fund) selling. Once that occurs it clears the way for dramatic gains. It’s not likely that JPMorgan and their big bank cohorts will take such large short positions again. The numbers are too large and the risks are greater than before. We are on the verge of another great buying opportunity. Any silver bought under $18 to $20 is a fabulous long-term bargain.

There have been no big withdrawals from either GLD or SLV, as might be expected by the decline in prices. In fact, there was a deposit of 2 million ounces into SLV. This indicates serious accumulation by what is most likely a large buyer, with JPMorgan the leading candidate. I also mentioned a recent uptick in sales of Silver Eagles from the tepid pace of the past few months. At first I thought this was a pickup in retail demand, but a more recent report of a large purchase makes me suspect that JPMorgan has reemerged as the big buyer of Silver Eagles. I had doubts that JPM would be so brazen to repeat a scam this bank has utilized before, namely ceasing to buy Silver Eagles when it was about to depress the price of silver and buying again after a decline. But, no one does brazen like JPMorgan.

The possible return of JPMorgan in buying Silver Eagles, as well as the presence of a big buyer in SLV, are potentially bullish signs for higher prices and indicate JPMorgan is still accumulating physical silver. And there are no signs that JPMorgan is selling silver in any form, paper or physical. Still, as bullish as these signs may be, I must remind you that over the past week or so, while JPMorgan may have picked up a few million ounces of silver between Silver Eagles and in SLV, it bought back 50 million ounces in paper COMEX contracts in the last COT Reports. Therefore, the big dollar impact for JPMorgan remains in how well it controls COMEX positioning in the near future. Buying back as many of its COMEX paper short positions is the most important thing for JPMorgan, at least as far as I can tell.

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