In Ted Butler's Archive


For quite some time, I have raised the possibility of a “double-cross” in silver, whereby the big silver short, JPMorgan, turns against the other commercial shorts and lets prices soar since JPM is protected against overall loss by its massive physical silver position. JPMorgan operates similarly in COMEX gold as it does in silver so there is nothing precluding a double-cross in gold. After all, JPMorgan has most often been the biggest paper short seller in COMEX gold futures and has accumulated some 20 million ounces of physical gold over the past several years. The linchpin of the double-cross is the ownership of a large physical position which vastly exceeds the size of the paper short position. It doesn’t really matter if the linchpin exists in silver or gold, or both.

Any commercial double-cross would not be broadly known beforehand, with the element of surprise firmly in place. Any advance signals would involve actions benefitting the agent of the double-cross, in this case the biggest gold and silver short, JPMorgan. The signs of a double-cross are present. It would appear that JPMorgan bought back a disproportionately large quantity of gold contracts sold by other commercials, not by managed money traders. Admittedly, this is subtle and not likely seen by the casual eye, but it’s in keeping with the double-cross premise. The overall market structure in COMEX gold is solidly bullish. This is largely the result of the gold price having spent the last month trading below its key 50 and 200 day moving averages, the longest such stretch of time in the past year. You have to have prices trading below the key moving averages in order to get the managed money technical funds to sell heavily and that’s what has occurred in gold. I’m much more inclined to think that the potential double-cross in the gold commercial camp is a last-minute finishing touch to an important advance about to launch in gold and silver.

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