The month of October marked the highest amount of Silver Eagles sales over the past five years. One could ask why the price of silver was coming down from its peak early October. Of course part of the answer lies in the fact that Silver Eagles are not the only form of silver bullion. But there have been numerous examples in the past where the demand for physical silver was increasing while its price was decreasing, as described by Jeff Nielson amongst many others.
The point is that the traditional law of demand and supply don’t always work especially not in the silver market. The central points is this: the price of silver is mainly determined in the futures market. That’s a totally different story than how the mainstream media is reporting it. The typical explanations we hear in the media: a worse than expected unemployment report caused a flight to gold and silver as safe havens, or better than expected GDP figures caused investors to get out of precious metals. The truth is different.
Now one of the true experts in this matter is Ted Butler. He is not only respected because he is in the precious metals markets for more than three decades but also because of his tremendous inside knowledge. His analysis goes to the heart of the price setting: the Commitment Of Traders reports. Based on years of in-depth analysis, he came to the conclusion that the price of silver is manipulated and he is best positioned to explain himself why and how this manipulation happens. Although he believes that the manipulation has a strong short term effect, he is convinced that the longer term price is controlled by the increasing demand for physical silver. So yes the future looks bright, although there is uncertainty in the very short term price setting.
GoldSilverWorlds was authorized to bring this excerpt from the last premium newsletter to its readers. In it, Ted Butler explains in the simplest possible way the dynamics of today’s silver price manipulation. For more in-depth analysis and insights in the dynamics of the precious metals market, we strongly recommend to subscribe to Ted Butler’s newsletter.
Let me speak in simple terms. JPMorgan is stuck in silver, in my opinion. They bought a pig in a poke when they bought Bear Stearns in 2008 and took over the manipulation of the silver price. Armed with US Government financial assistance that probably included a promise of immunity against being charged with manipulating the price of silver, JPMorgan plunged headlong and willingly into that manipulation. Armed with virtually unlimited capital and regulatory carte blanch from the government, JPMorgan set out to dominate the paper silver market, just as Drexel Burnham, AIG and Bear Stearns did before that. Because the counter party technical funds could be bamboozled into and out of the market by the rigging of prices, JPMorgan came to “own” the silver market. But they became too clever for their own good. JPMorgan became such a dominant force in silver that the tables became reversed and it is unclear if whether silver now owns JPM. That may sound extreme, but let’s look at the facts.
There is an unusual concentration on the short side of COMEX silver. So unusual is this concentration that the CFTC, when faced with hundreds of complaints about the concentration began a formal investigation more than four years ago, unresolved to this day. In response to requests from lawmakers back then, the CFTC (inadvertently) identified JPMorgan as the biggest silver short. Since then, it has been easy for me to calculate JPMorgan’s continuing concentrated position. Even though it is perhaps the most aggressive and litigious of all financial firms, JPM has remained silent to continuous allegations that it is behaving illegally in silver. That silence has only help spread the growing awareness of JPMorgan as being the big silver crook.
No one reading this has ever witnessed a giant financial organization ignoring allegations that they are breaking the law. That includes me and I admit that it seems other worldly to me that I am the one making the allegations, as that was never the plan. But that doesn’t change the fact that whatever JPMorgan does will determine the price of silver. JPMorgan recently added 100 million oz in paper shorts because no other combination of traders was willing to do so. If JPM hadn’t sold short such large quantities of paper contracts, silver prices would have exploded, threatening to expose that silver had been previously manipulated in price. Having added such a manipulative short position, JPMorgan must now somehow rig prices lower to force the technical longs to sell so that JPM can buy back its manipulative shorts. When you get to the extreme position that JPMorgan holds in silver, you are damned if you do and damned if you don’t. I hope this is simple enough.
The moral of this story? Be sure to own physical silver and don’t worry about the daily price movements. Over the long term, fundamentals reign.