“First time in history” Setup for Silver

The head of one of the US’s large bullion dealers, Miles Franklin, wrote the following piece on the news that the Commercial’s on COMEX are net long for the first time ever and critically, J P Morgan out of their short futures position and long physical – big time.  It’s worth repeating verbatim so here you go….

“For the first time, the Commercials are long

Do you realize how unusual this is? First of all, last week silver ended lower for the 13th week in a row and is at the lowest price since the first quarter of 2016. The silver to gold ratio is an incredible 84.39 to 1. I can't recall it being higher. We're talking about a multi-decade high. Couple that with the fact that JPMorgan has covered most of, if not all of its silver shorts, this makes adding silver to a portfolio a no-brainer. It's not just JPMorgan. Ted Butler says this is the first time in history that the "commercials" are net long silver.

Silver has dropped nearly $3 in the last three months. This was due to the managed money technical funds short selling. They are usually on the wrong side of these trades. Of course, the big buyer was JPMorgan. They purchased about 175 million ounces of silver (35,000 contracts) during the price decline.

JPMorgan has covered its silver shorts and is on the long side of the trade for the first time since 2008 when they took over a massive short position from Bear Stearns. How many times have you heard that "the commercials never lose."

JPMorgan wins on well over 99% of their trades! As of this Friday, it looks like they are no longer short. Doesn't this indicate to you that from here on, silver is set for a huge upswing in price? I can't imagine a scenario where silver won't rise. That's why I added another 2,000 ounces to my already large silver position on Tuesday. This really is the buying time of the decade in silver, and if silver takes off, gold will not be left behind. The precious metals do tend to move in unison.

Secondary Market

There are always signs that precede a bottom in gold and silver. What is the commonly accepted definition of a bottom? When all the sellers are gone and there are only buyers left. That is the case in the retail physical gold and silver market. We can tell because gold and silver are not available on the "secondary market" from the wholesalers. There are two sources of gold and silver: New coins from the mint and used coins that have been sold back to the wholesalers that are available for re-sale. Yesterday when I placed my order for 25 Gold Buffalos, I could only get 15 "back dated" Buffalos and the remaining 10 were 2018 new product from the mint. Both of our suppliers are out of junk silver (one had 60 bags a couple of weeks ago) and out of back-dated Gold Eagles and Buffalos. That means that the buy-backs have dried up and no one is willing to sell back at these low prices. That is an indicator of a bottom.

We were just notified that the premium on gold and silver from the US Mint has increased. Not just the spot price, but the "premium" over the spot price. That means the demand is now putting pressure on the available supply. This also happens at market bottoms.

The US Mint Is Out of Silver Eagles and the Wholesale Prices Are increasing

In the first two business of days of September, the mint has sold 1,037,500 silver eagles -- and in conjunction with that fact, the Internet was all atwitter yesterday with a rumor/fact that the U.S. Mint is out of stock of silver eagles.  Obviously, the Mint has scaled back production in response to the fall-off in sales (all JPM's doing)".

Just a heads up in case your usual eagle-eyed subscribers didn't see this today.  The U.S. Mint stopped selling 2018 Silver Eagles [ASE] today...but only temporarily.  They sent an e-mail to their Authorized Purchasers [A.P.s] stating that recently increased demand had depleted their inventory.

Some A.P.s with existing 2018 ASE inventory then raised their wholesale asking prices for sealed case quantities from the usual Spot + $2.25 or so to Spot + $3.00 per coin (the Mint currently charges their A.P.s spot + $2.00).  That is a wholesale premium of about 21% over spot, basis $14.20, highest this year.

Back-dated ASE product in the secondary market - which has been plentiful for the last year or so due to investor dis-hoarding - has mostly been bought up also.

The Retail Buyer Has Been Out of the Market

The retail market is the market we sell to. They are the "small" buyers. They have exited from the market as the prices have continued to fall. But the "Big Money," the smart buyers are still there and are buying large quantities of gold and silver. They take delivery of huge amounts of gold and silver from GLD and SLV or the COMEX-approved warehouse. Look at the ounces that JPMorgan has accumulated as the prices have fallen. They took delivery of 7 million oz of silver in September, all of it for their house account (rather than for their client accounts). Their game is to go short to influence the managed money momentum funds to go short, then they buy physical metals at lower and lower prices. Very smart. Sure, it's market manipulation but as long as the CFTC turns a blind eye they continue to do it. This has allowed JPMorgan to accumulate 750 million ounces of physical silver over the last 7 and a half years!”