In Ted Butler's Archive


For the first time ever, the 8 big shorts (large banks and brokers) on the COMEX have taken to adding impressive quantities of new gold and silver short positions on declining prices. Previously, these big commercial shorts had only added new short positions on rising prices and had bought back those added short positions on lower prices. They always made a profit until the summer of 2019, when their “money machine” stopped working. After loading up on the short side on rising gold and silver prices in June 2019, the prices continued to rise, denying the big commercial shorts the opportunity to buy back those added shorts at a profit. Instead, the continued price rise in gold (and later in silver) created the largest losses for the big shorts in history, which now amount to more than $11 billion.

What accounted for the turn in fortunes for the 8 big shorts? A new category of traders has entered into the fray and appears to have completely upset the applecart of how things had been done. I’m referring to the traders in the “other large reporting category,” a category that while not new, nonetheless appears to have transformed the price setting equation. In the past 8 months the net long position of the “other large reporting traders” has climbed to record levels even as gold prices have pulled back.

What’s so fascinating about the increase in big 8 shorts (banks and brokers) selling for the first time as gold prices declined from $2,060 in August is that these 8 big shorts caused prices to decline. But even more fascinating is that the (sole) buyers on that gold price decline were the other large reporting traders on almost a contract-for-contract basis, opposite to the big 8 shorts. The “other large reporting traders” patiently and methodically bought and accumulated what the 8 big shorts were selling. Talk about unprecedented!  Until now, it was always the 8 big commercials lying in wait for the managed-money traders (hedge funds) to exhaust themselves on the buy or sell side, with the big 8 traders methodically taking the other side of those transactions. But the “other large reporting traders” are doing to the 8 big commercials (banks and brokers), what those 8 big traders always did to the managed-money traders (hedge funds). The “other large reporting traders” have finessed the 8 big shorts. How fitting. As to who these traders are, all we can know for sure is that they are speculative traders which trade for their own account (otherwise they would be in the managed money category). And to be frank I don’t care who they are. They know what they are doing and have played the big 8.

Not only have the 8 big shorts chosen to increase their exposure to the short side in a manner that seems particularly risky, they are doing so at a time when they are also deeply underwater – a risky gambit to say the least. The fact that the “other large reporting traders” have taken the unprecedented step of buying as prices declined suggests they intend to hold for meaningful price gains. It’s likely that these big buyers have come to recognize the vulnerability of the big shorts.

Because the short positions in COMEX gold and silver are so concentrated – meaning they are held by just a handful of traders – this makes the short sellers more vulnerable to a price move higher, a process known as a short squeeze. The big shorts are looking down the gun barrel of much higher prices on which they stand to lose billions more.

Even though there has never been collective short covering by the big concentrated shorts in COMEX gold and silver and these big shorts have remained in control, all the signs point to them losing control and most likely in the near future. Moreover, a coming clash and struggle over available physical silver supplies is certain to erupt at some point between investors and industrial silver users for the very first time. These market conditions offer additional bullish reasons for the price of silver to soar. At some point, it will not surprise me to see silver jump $5 in a day.

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