Editor’s note: New readers may not be aware that Theodore Butler writes a $400 a year newsletter on silver. He has been a consultant to Investment Rarities for 22 years. We consider him to be the world’s foremost authority on the silver market.
It seems that every important factor I follow in silver is intensifying and becoming more bullish. The most important factors in silver are wholesale physical market conditions; the futures market structure on the COMEX; the physical silver and gold holdings of interests associated with JPMorgan; developments in the short position of SLV, the big silver ETF; and the status of the massive OTC derivatives position of Bank of America. Not necessarily in order of current importance, let me touch on a few today.
In COMEX silver futures, the commercial net short position declined by 67,000 contracts. That’s the equivalent of 335 million ounces of silver. The 4 largest commercials alone have reduced their concentrated short position by 31,000 contracts (155 million ounces). These reductions have led to what are effectively the lowest commercial concentrated short positions in modern market history. For someone who has focused on the concentrated commercial short position as being the linchpin in the decades-old price manipulation, this might be the most bullish fact of all. It means that the largest shorts are not likely to build a large short position again.
An important feature of the past six months has been the surge in import demand for silver and gold from India and China. Published reports indicate that India imported 58 million ounces of silver in August, with this year’s total demand estimated to be more than 250 million ounces, or more than 25% of annual world silver production (mining plus recycling). This surge in import demand accounts for the sharp decline in world silver inventories.
Another significant fact that occurred over the past six months is the massive rise in the short position on SLV, the largest silver ETF. As of August 31st, the short position in SLV has nearly doubled to more than 60 million shares (55 million ounces). This has everything to do with there not being enough physical silver available for deposit into the trust, forcing the short sales in lieu of required metal deposits.
This a clear case of manipulation and fraud. As a result, I wrote for a third time in little more than a month to the chairman and general counsel of the Securities and Exchange Commission to allege that BlackRock, the sponsor of SLV, was in stark breach of its fiduciary responsibilities, not only to shareholders of SLV, but also to shareholders in BlackRock (BLK) itself, since no management fees are paid on shorted shares, depriving BLK shareholders of millions of dollars in SLV management fees.
I also sent a copy to the SEC and to both the CEO and president of BlackRock, as well as the attorney BlackRock engaged more than 11 years ago on my last go-around with BlackRock on the short position on SLV. The COMEX futures positioning is the most bullish it has ever been. No rational person could justify a massively-large short position on silver, with its super-depressed price. Not for a moment have I lost any of the super-bullish enthusiasm towards silver that I’ve displayed recently and every day seems as good as any for the blastoff.
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