Silver and “The Shameful Eight”
Posted May 25, 2021
“Silver is overvalued.”
Three words you’re not likely to hear.
While corn is gunning for the 2012 all-time high, up more than 50% in 2021…
And soybeans have been trading only a hair from all-time highs…
AND copper busted through its all-time high…
And lumber has long blown past its all-time high…
There’s one commodity that’s still well below its all-time high, despite a massive and comparable rise in demand around the world…
According to Ted Butler, the main reason why is an open secret.
Butler’s been writing about the silver markets for over 35 years. And he’s been writing about it online since 1996, back when most people didn’t even know how to use the Internet. His main focus has been on the concentrated short positions in silver.
“Only in silver,” he writes, “does such a gargantuan and grotesquely large concentrated short position exist and has existed for more than 3 decades.”
The current massive short position in COMEX, he says, is mostly held by 8 major financial firms:
“We can only guess who they are because their identities are protected. According to the COT reports, the biggest 4 are short nearly 60 thousand contracts and the next 4 are short nearly 20 thousand contracts. That’s a total of almost 400 million silver ounces.”
Furthermore, he adds, “it is concentrated in a few hands and thus open to manipulation. Over the years, this shorting strategy has proven to be lucrative as the big shorts would buy back their short positions on price drops.”
Consider just how much the short position in silver dwarfs any other commodity: “the concentrated short position of the 4 largest shorts in silver is ten times larger than the equivalent short position in corn, six times the concentrated short position in soybeans or copper, four times the short position in palladium and so much greater than the equivalent short position in lumber that it’s impossible to calculate.
For decades, Butler’s spoken out against this massive short position, but largely to no avail.
“As testimony to that effort,” he says, “I did succeed in getting the CFTC to publicly respond twice to the issue in 15 page public letters, in May of both 2004 and 2008. Later in 2008, I succeeded in getting the CFTC to initiate a formal five year investigation by their Enforcement Division due the unusual concentration by a US bank (JPMorgan) in COMEX silver and gold, as revealed in the Bank Participation Report of August 2008. True, the letters were nonsensical and the investigation went nowhere, but the fact remains the CFTC reacted because the issue of concentration on the short side was that important.”
Enter the #SilverSqueeze
While Butler’s watched for decades as regulators dance around the subject, he’s never seen them whip into action more quickly than recently when retail investors became interested in the moon metal.
In February, with the Gamestop saga winding down, the wallstreetbets crowd began posting about the #silversqueeze.
On March 1, an article in Bloomberg Law by law firm Clifford Chance revealed that the CFTC was reportedly investigating retail silver trader activity in goosing the silver price and that the US Department of Justice was set to investigate as well.
Indeed, while all other commodities were flying through the roof, the CFTC reacted to a $4 move in silver, announcing its deep concern for the market activity due to Redditors named “deepsilverbuttplug” and “royalsnuff” and even launching an investigation.
Huge price increases in lumber, corn, soybeans, copper, and lumber have direct negative consequences on the consumer and hundreds of industries.
But, though it would have much less of a negative impact on consumers, says Butler, a huge increase in the silver price would have a negative impact on the big silver shorts “and it’s hard not to conclude that is the Commission’s primary concern.”
Manipulation or not, silver is a screaming buy. As Butler put it: “Even those who still deny a silver manipulation exists, are nonetheless bullish on its price prospects for other reasons unrelated to a price manipulation.”
Silver is money. The Fed can’t print more. Silver is also necessary for the next wave of technological infrastructure -- the so-called “Fourth Industrial Revolution.”
Barring some major game-changing technological golden swan event…
Silver will be the metal of the decade.
And possibly even…
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Managing editor, Laissez Faire Today