By Ted Butler —
Even with price capping by the largest eight silver shorts, silver can jump quickly to $20 or higher. Without such price capping, silver can jump by $10 to $20 in a hurry. A little more than four years ago, silver ran to almost $50 in a matter of months. The setup today is infinitely better.
Without a doubt there is a radical change in JPMorgan Chase’s formerly concentrated short position in commodity exchange (COMEX) silver futures. In the six years in which I had first discovered that JPMorgan, as a result of acquiring Bear Stearns, had become the biggest COMEX silver short, the bank has never held a smaller short position than it does now. Considering what I think the bank has accumulated in physical silver over the past three and a half years, it appears to me that JPMorgan is massively net long in silver, to the point of perhaps holding the largest silver position in history.
[Short selling or shorting is the practice of selling a financial instrument—in JPMorgan’s case it is silver—that is never actually owned by the seller. The theory behind short selling is that the price will decline, enabling the security or instrument to be bought back at a lower price to make a profit. Should the price go up, however, the short seller stands to lose money based on just how much the price rises.—Ed.]
There is no question that a concentrated position is at the heart of every manipulation, and JPMorgan’s concentrated short position in COMEX silver since March 2008 meant that the bank was the big silver price manipulator. But now, JPMorgan is no longer the big silver short and may now be the big silver long. It took years and a price rigging that resulted in a sickening drop in the price of silver, but JPMorgan has succeeded in completely reversing its overall position in silver from short to long.
Without JPM joining in, I doubt the biggest eight banks will succeed in capping prices as they have on every past occasion. And considering the swirl of negative news surrounding big banks influencing commodity prices, it’s hard for me to imagine JPMorgan not quitting their manipulative control of silver to the downside.
The recent double-cross of a group of smaller commercial financial firms, who were net long, is remarkable in its own right. The forced sale of more than 12,000 net contracts by around eight to 10 “raptors” over the past few weeks has probably knocked those traders out of silver permanently considering their losses of $200 million.
There is no doubt these 12,000 contracts would have been sold on the next silver rally and now that is impossible.
Mathematically, this greatly increases the burden on the eight big shorts. They will have to sell many more contracts short than they would have, had the raptors not been double-crossed. This increased short selling burden on the big eight should persuade them not to try.
I have a hard time imagining how silver won’t melt up in price. I think I should express this as clearly as possible, making it a great investment.
While I am more convinced of a silver price melt-up, the “Commitments of Traders Report”—a weekly report published by the Commodity Futures Trading Commission—supports higher prices in gold, copper, platinum and palladium.
Ted Butler is an expert on silver and runs Butler Research LLC, a source of information on the silver and gold markets.