Jim Cook: Let’s get the big question of the day out of the way. What impact do you think the coronavirus will have on the precious metals market?
Ted Butler: People will definitely buy more gold and silver. If the outbreak causes the stock market to fall, they will buy more. However, that kind of individual buying doesn’t move the market.
Cook: What does?
Butler: The price is set on the COMEX with the big banks and hedge funds fighting it out.
Cook: Copper dropped, could silver follow?
Butler: If silver drops I doubt it’s because of the virus, it’s more a consequence of manipulative selling on the COMEX. Same with gold. Any decline in silver will be brief, contrived and artificial. In other words, a greater buying opportunity.
Cook: You have said the risk is mostly out of silver. What do you mean?
Butler: At today’s prices, silver is selling at historic lows. You maybe have a 10% downside risk from here against a likely 1,000% gain.
Cook: Back in 2005 you predicted that silver would rise by ten times. It did just that. Are you saying that will happen again?
Butler: Absolutely. It’s going to happen again.
Cook: Why are you so sure?
Butler: A number of bullish factors make a price jump inevitable. Not the least of these is the actions of the biggest silver hoarder in history, JPMorgan.
Cook: How important are they?
Butler: They are the whole story. Nothing else matters much in silver. You read a lot of theories and arguments about silver that are wide of the mark. If they’re not talking about JPMorgan, they are mostly wrong.
Cook: Can you explain that for us?
Butler: JPMorgan is the major player in the futures market. For years they have racked up big gains trading silver and gold. The bottom line is that for the past eight years they have been heavily short enough silver futures to suppress the price. Meanwhile, they have been buying physical silver hand over fist.
Cook: How much silver?
Butler: They now own 900 million ounces. That’s about one-year’s annual mining production. No other commodity comes close to having someone own everything produced or mined in a year.
Cook: How do you come up with that amount?
Butler: They report 161 million ounces in their own COMEX warehouse and they have another 100 million ounces in other COMEX warehouses. For years they have been the chief stopper for every futures delivery month. They have converted shares to silver in the ETFs, melted large quantities of coins and skimmed silver from deliveries.
Cook: Is any of it legal?
Butler: Not the way they manipulated the market to get it. They held the price down while they scooped up this huge quantity of silver. It’s contrary to commodity law. I’ve often called them lawbreakers and crooks.
Cook: What do they say to that?
Butler: I’ve sent years of my articles calling them manipulators to their CEO Jamie Dimon, their board of directors and their lawyers and I’ve never heard a word from them.
Cook: That must mean you’re right.
Butler: Well I once wrote an article criticizing BlackRock’s short position in an ETF. Within days I heard from their lawyers threatening a lawsuit.
Cook: Is JPMorgan still acquiring silver?
Butler: Absolutely, I think they may be trying to get a billion ounces.
Cook: Why so aggressive?
Butler: Why does anybody buy silver? They think it’s going up, and not just a little. A $100 increase in the price of silver gives them a $90 billion profit. They could easily come out of this with $200 billion.
Cook: That would mean silver was $200 an ounce. Is that possible?
Butler: If JPMorgan and several other big banks had not continuously sold it short, it would be around $80 to $90 which I think is the free market price.
Cook: How does it get to double that in price which is your prediction?
Butler: The artificially low price for years reduced the amount available from mining and eliminated research for substitutes for a multitude of industrial uses. It was so cheap the above ground supply diminished to the point that availability was limited.
Cook: What do you mean by limited availability?
Butler: When investment demand picks up you will see a shortage develop. About 50 to 100 million ounces is available each year for investment. That’s not much. When that’s gone, the industrial users will feel the pinch. They will begin to hoard and stockpile the silver they must have to do business. When that happens the price will have to burn itself out at some heretofore unimaginable level.
Cook: I want to be there for that. How soon?
Butler: I keep thinking it’s imminent. We have had to wait it out, but I believe that’s changing now.
Cook: Based on what?
Butler: JPMorgan appears to be reducing or closing out their short position. That would cause silver to break free.
Cook: Why would they do that now?
Butler: For one thing they stand to make an enormous amount of money by letting it go and as you know the Justice Department has turned the heat up on JPMorgan. Criminal charges against their metals trading desk and the recently announced criminal probe should certainly make them change their ways.
Cook: All credit to you for uncovering JPMorgan’s sins years ago and enduring the skepticism from so many. Congratulations.
Butler: Thank you.
Cook: What about the other big shorts?
Butler: They have an enormous problem. They have not been able to drive the price of gold and silver down to the point that the longs start selling thus enabling the shorts to cover. That makes a short squeeze probable.
Cook: What happens then?
Butler: The price rise will be one for the ages. If you own silver, it will dramatically improve your finances. Remember with the spot price under $20 an ounce, the downside is limited. The risk is negligible while the reward is ten times today’s price and perhaps more.
For subscription info please go to www.butlerresearch.com