In Ted Butler's Archive


The big silver story continues to be the surge in deposits of physical metal into the world’s silver ETFs. This past week, the amount added to the silver ETFs blew the doors off, as more than 28 million ounces were added. This is the annualized equivalent of nearly 1.5 billion ounces or nearly twice as much as total annual mine production and twice as much as total world silver inventories outside of the ETF and COMEX. Clearly, the pace of physical flows into the ETFs can’t possibly continue at this rate, since there doesn’t exist enough silver in the world to support it. How is it possible that so much physical silver can be deposited into the world’s ETFs without any great impact on price?

It’s no secret that JPMorgan has supplied the 200 million ounces bought and deposited into the silver ETFs these past few months, for the simple reason it is the only entity capable of doing so. The moment JPMorgan stops supplying physical silver to the market and refuses to add new COMEX short positions, thereafter big shorts will not be able to keep the lid on prices. I believe JPMorgan has been leasing the bulk of the metal to other banks which in turn sell it to the ETFs. That would explain the lack of an immediate sharp price increase, but strengthen the long term price outlook and fit with JPMorgan’s established profile of duplicity.

Two facts – that the total commercial net short position in silver is half what it was at the end of February, and that JPMorgan is no longer short – produce a market structure that’s bullish beyond words. We ended last week with the 8 big shorts in the hole by 10.2 billion. Never have the big shorts been this deep in a financial hole.

Given these facts it seems the most prudent course of action is to buy and hold as much silver as possible. There’s always a risk of short-term selloffs, as this is still a highly manipulated market and the big shorts will not give up easily, but the temporary risk of a short-term selloff must be measured against the much greater likelihood of tremendously higher prices. Something is definitely “up” with the recent record ETF buying.

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