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Editor’s note: Once again the intrepid silver analyst Theodore Butler has uncovered amazing facts about the silver market.
I am truly astonished by the massive increase in the OTC precious metals derivatives position of Bank of America as reported in the quarterly derivatives reports from the Office of the Comptroller of the Currency (OCC), part of the U.S. Treasury Dept. Over the past 18 months to September 30, 2021 Bank of America’s precious metals derivatives increased more than a stunning 100 times, from $173 million to $18.266 billion. In percentage terms, that’s a 10,000% increase, so outside the normal bounds to be shocking. The stark increase in the precious metals derivatives holdings of Bank of America raises the question of why such a massive increase? It also raises questions about bank supervision, both on the part of the OCC and related regulatory agencies (the SEC and CFTC) and internal supervision by the CEO and board of directors of Bank of America.
The newest report, for positions held as of Sep 30, 2021, puts the amount of silver ounces borrowed and sold short by BofA at 800 million ounces. This is an amount of silver so stupendously large so as to be shocking and dangerous almost beyond belief. That’s why I have continued to send my articles to the CFTC and CME Group and have contacted the SEC and the OCC. The OCC got back to me with an explanation of how they developed their derivatives report. I responded as follows:
“Thanks so much for the prompt reply. Unfortunately, this data was already known and clear to me. What I am asking about is that Bank of America increased its precious metals derivatives position from $173 million (notional amount) from the first quarter (March 31, 2020) to $18.266 billion at the end of the quarter just reported (Sep 30, 2021) – an increase of more than 100 TIMES or 10,000%. All while BofA’s total derivatives position decreased by a couple of percent over this same 18-month period. If the OCC was the NORAD incoming missile defense system, this would be the equivalent of DEFCON 1 – indicating something was seriously amiss. How can I get greater clarity on this issue? Thanks and please advise.”
Shortly thereafter, I received this: “Hello Ted, We do not have any additional comment beyond what we previously provided. Sincerely.”
I don’t think anyone at the OCC had any inkling of the large increase in BofA’s precious metals derivatives position or what it might portend and I think my contacting it was the first time the OCC saw that something was amiss. I don’t think even Bank of America was fully aware of the large increase in its precious metals derivatives position. Speculating further, I believe that both the OCC and Bank of America should now be aware of this situation. Therefore, I would expect either a strong rebuttal by Bank of America to my allegations or perhaps some action to deal with the largest silver short in history. Should neither occur, I intend to press the matter with those elected officials who have direct oversight responsibilities over bank supervision matters.
If, as I strongly believe, Bank of America has actually borrowed and immediately sold short many hundreds of millions of ounces of physical silver, there is another side to the story, namely, the extraordinarily bullish implications for the price of silver ahead. The essence of any short position is that it has a price-suppressive effect as it is established or put on, but once the short selling is complete, the price-depressing influence is spent. But because any short position is also an open-ended transaction that must be closed out – by delivery or a buyback of the short position – this has a direct and bullish impact on price.
Once the short-selling campaign of Bank of America in silver is complete and it begins to buy back its silver short positions in the physical market to deliver against its shorts it will have a profoundly bullish impact on the price of silver. Based on everything I see we are precisely at the “crossover point” when BofA begins to buy back its massive short position. The impact on price should be immediate and akin to flipping a light switch from “off” to “on” only in this case instead of a light going on, the price of silver gets lit up. Aside from the profound effect it should have on the price of silver ahead, BofA’s actions to this point greatly explain the price conundrum we have all experienced over the past year and a half, where just about everything under the sun should have been reflected in much higher silver prices. Bank of America’s dumping of many hundreds of millions of ounces of silver on the market offset all the plain-as-day bullish developments. All that’s missing at this point is the actual ignition of silver prices to the upside. It’s as if the Saturn rocket is on the launch pad, fully fueled, with the countdown complete and the only thing preventing the rockets being fired is some type of minor short circuit in the firing mechanism that will momentarily correct itself and liftoff will commence.
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