In Ted Butler's Archive


Let’s look at the facts as I know them to be. The price of silver has fallen four and a half dollars (20%) over the past two months, to a series of new four year price lows, the largest decline for any commodity I’m aware of. Physical silver is not something that can go bankrupt, cease to exist or be suddenly made unnecessary in its thousands of vital industrial applications. Physical silver investment continues at a strong pace, as evidenced in the sales of Silver Eagles from the U.S. Mint and the growth in metal holdings in the largest silver ETF, SLV.

I can uncover no fundamental reasons for the price decline and, I can assure you, I have looked hard for such explanations. There has been no verified increase in supply and no documented decrease in demand. By process of elimination, the reason for the sharp silver price decline is not from actual supply and demand. The sole reason for the price decline is futures position maneuvering on the COMEX.

For the past two months, the big traders that are called commercials have been on a historic buying binge on the COMEX, buying silver futures contracts for eleven uninterrupted weeks, as documented in government data. Wait a minute – how can that be? How can the big commercials, led by JPMorgan, have been on an historic buying binge while silver has declined in price by more than 20%?

The simple answer is that is the way the market works. The commercials can only buy when they can induce other futures speculators to sell to them and the only way the commercials can do that is by rigging silver prices lower on the COMEX. The fact is that the commercials have always bought on price declines and unless you believe large traders like JPMorgan have no idea of what they are doing, you should be following their lead.

This sell-off has only occurred because JPMorgan and the other COMEX commercials were determined to buy as many silver contracts as possible by scaring other traders into selling or to get them to go short because of the charts. When the process is complete, silver prices will move higher, the only question is by how much. No one can answer that question in advance, but considering the historic nature of this decline in terms of price and commercial purchases, it is quite possible that when silver prices turn they will rocket like never before.

Silver prices are well below even “stupid cheap” levels, and when the turn-up in price occurs, we should be substantially higher on purchases made now. As a result of this deliberate price takedown, there is much less risk and much greater profit potential than there would be if prices hadn’t sold off. It’s not just about super cheap prices, it’s more about the massive amount of silver contracts, around 250 million ounces that JPMorgan and the other commercials have just purchased. They didn’t buy this much silver to sell it at a loss.

On all previous times like this in the past, when the commercials have bought massive amounts of COMEX silver on dramatic price declines, it is only a matter of time before prices rally sharply. I can’t see any reason why it would be different this time.

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