The JPMorgan Gift?

Regular readers will know that every now and then we pass on silver analyst Ted Butler’s thoughts.  Ted is dedicated to analysing the COMEX futures market via the weekly CFTC Commitment of Traders (COT) report and the monthly Bank Participation Report.  He has established that banking giant J P Morgan are both the biggest holder of short futures contracts (selling, or betting on a price decline) whilst simultaneously having the largest (long) physical silver hoard, which he estimates at around 400m oz.  The graph below shows that in COMEX plus he maintains JPM have been a large reason for the record high US Silver Eagle sales.  

The premise is both simple and disgusting at the same time.  Short this relatively small market with your enormous might and client money, suppressing prices, and simultaneously buy up real physical metal at a bargain.  The theory is – make money on the way down on paper/futures trades and when the whole paper/financial system collapses, you are sitting on a pile of insurance in the form of physical silver to save yourself from going down with the rest of the banks.  The beauty is that ‘mum and dad’ investors and self managed super funds can play the same game enjoying buying at the same current low prices established by these commercial banks.  It in part even explains the sky high GSR.

Here’s a little of what he had to say last week:

“In silver, it’s different – the 8 largest COMEX traders hold 400 million oz net short versus maybe a billion oz or so of actual inventories and in the face of an unprecedented inventory turnover pointing to no spare metal being available. This is why the price of silver has been made to look so rotten – so as to discourage anyone from even thinking about buying it. While I must admit it has worked like a charm for the crooks at JPMorgan over the past five years, it’s a scam running out of time.” 23/2/16 

The elephant in the room, with such elevated short positions amongst these commercial banks, is that should there be a market shock (sharemarket crash, big default, war, etc) which sees the real price of silver spike, you could well see the mother of all short covering rallies as they rush to close their short positions….