In Ted Butler's Archive


This week, a subscriber asked me to summarize the facts supporting my claim that silver is in a pronounced wholesale physical shortage. For one thing, there was the persistent, large physical turnover of silver in the COMEX warehouses for more than 12 years. This movement has now come to include the silver ETFs. This turnover is highly unique to silver of all commodities. Who moves great quantities of physical stuff around except under extraordinary demand?

Then there is the matter of dramatically falling silver inventories. The recorded world inventories of silver have fallen by roughly 400 million ounces, from 1.7 billion ounces at the start of 2021 to just over 1.3 billion ounces today. Virtually all of the decline has come in the two largest silver stockpiles in the world, the COMEX warehouse inventories and the holdings in SLV. This has been the largest silver inventory reduction in history and since when haven’t sharply declining world inventories of any commodity indicated a deepening shortage?

Finally, there are the reports from sources thought to be fairly-objective, like the Silver Institute citing more than a decade of flat to declining annual silver mine production and growing demand – to the point of creating (in its words) a record deficit. Isn’t “deficit” just another word for shortage? I understand how the influence of price affects us all, particularly if the price sends false signals for decades, as has been the case in silver. But I also understand the power of the actual law of supply and demand and how a deepening physical shortage cannot possibly be reversed, as it must, with continued low prices. Admittedly, even these words might ring hollow if there was no reasonable explanation for why the price of silver was out of step with the actual fundamentals.

However, a reasonable explanation exists and is proven out by official data, in the form of the statistics published by the U.S. Government’s weekly Commitments of Traders (COT) reports. These reports show beyond question that the price of silver (and other commodities) is artificially set in COMEX trading between two separate sets of large traders, the commercials (largely banks) and the managed money traders. Were it not for these reports, the explanation that the price of silver has been artificially manipulated and suppressed in the face of a deepening physical shortage would not exist.

But the reports do exist, as does the explanation for how silver prices could remain so low for so long in the face of the most important signs of a physical shortage. The inevitable conclusion will be a dramatic upward surge in the price. By all measures, this week’s dramatic selloff and volatility augur even more strongly for a coming price explosion.

This week, the combined holdings in SLV and the COMEX silver warehouses slipped by 10 million ounces to 712 million ounces, wiping out the previous week’s deposits and setting a new low, far below my bedrock low of 750 million ounces at the start of the year and the 730 million ounces plateau later on. While I still believe there is a level beyond which the holdings in SLV and in the COMEX warehouses won’t fall (due to investor holdings), this week’s sharp reduction is certainly in line with the deepening physical shortage.

And yes, back in early 2021, the combined holdings in SLV and in the COMEX warehouses hit 1.1 billion ounces (700 million ounces in SLV and 400 million ounces on the COMEX).  Silver prices falling from close to $30 to $22 today in the face of such dramatic inventory declines has an unassailable explanation. The price has been manipulated and depressed by paper positioning on the COMEX.

Due to the incredibly long time that an excessive short position in COMEX silver has suppressed the price, some 40 years, it’s impossible for the effects of the price suppression to burn out quickly in terms of the actual supply and demand equation fully adjusting to four decades of an artificially suppressed price. That the price of silver will soar to unimaginable levels is one thing; what I’m talking about is the time it will take for the world’s producers, consumers and investors to adjust to a sudden new world, where the price of silver suddenly loses the artificial price mechanism that has controlled and set prices for four decades. I’m talking about a shock to the system almost beyond comprehension.

I know it gets old hearing me talk about a deepening physical silver shortage and explaining the ongoing suppressed prices as being due to the continued price manipulation on the COMEX. But it is when you take the time to look at the actual facts of rapidly shrinking world inventories and the massive and unprecedented physical turnover of the remaining shrinking inventories, as well as the outside reports of declining production and increasing demand, that the choice of what to believe and how to invest should become clear.

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