In Ted Butler's Archive


On any objective basis, silver has numerous sound reasons pointing to much higher prices in the future. Silver is currently undervalued in price to a degree rarely seen in the past. In fact, the biggest knock against silver is that it has gone down for more than seven years while other assets have appreciated. But the price decline is what has caused silver to be undervalued, while the appreciation of other assets has caused them to be overvalued. I understand that investors feel better about buying assets that have appreciated; but this is not about feelings – it’s about undervaluation now and putting time on your side.

So what are the other reasons for buying silver now? How about the best COMEX market structure that has ever existed? There has never been a time when the true kingpins of the market, the traders referred to as the commercials and most particularly, JPMorgan, have been less short and are now net long in COMEX futures. Conversely, there has never been a time when the traders which have no legitimate economic reason to be short are now the biggest shorts. I’m referring to the record short position held by purely technical fund traders.  COMEX positioning is the cornerstone of my 35-year study of silver and it has never been more bullish than it is right now.

Such an extremely bullish market structure could only come at a time when silver was extremely undervalued in price, but the combination of the two make for a most compelling case for buying silver now. But wait, there’s more. The most dominant force in silver, JPMorgan, has not only eliminated completely its COMEX paper short position for the first time in a decade; it has increased its stockpile of physical silver to 775 million ounces, the most metal held by a non-governmental entity in the history of the world.

Common sense would suggest that if JPMorgan went to the trouble of manipulating the price of silver lower for the past ten years in order to buy more physical silver it wasn’t for a quick profit of a few dollars.  Reason dictates that JPM intends to achieve a major score – only selling on a price increase of ten or twenty times or more. I can’t tell you exactly when JPMorgan will decide to help itself to many tens of billions of dollars by letting silver run free to the upside, but it has never been in a better position to do so than now. I can also tell you that JPMorgan would much prefer that you wait to buy silver until it is much higher in price and it is looking to sell. Finally, I can tell you that if you are going to buy silver, you will be much better off buying now, while it is undervalued and with time on your side, than by waiting until it is overvalued and in great collective demand.

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