I’ve embraced one central theme for the past 30 years – that the price of silver has been manipulated lower on the COMEX. For a good part of those three decades I’ve exerted an intense effort in analyzing the actual supply/demand fundamentals of silver, including production/consumption trends and the resultant annual balance between the two, inventories, investment demand, etc. Those fundamentals indicate that the price of silver must increase dramatically in the future, making the manipulation both the cause and explanation for the continued low price.
While I still follow the actual fundamentals of the metal closely; increasingly, I write less about their influence on the price. Why shouldn’t I? After all, I can’t remember an occasion over the past few years where the actual fundamentals had any effect on price; silver (and gold) prices are set on the COMEX when speculators adjust futures positions. Yes, the fundamentals will dictate the future price of silver, but they have zero influence on short to intermediate term pricing. That’s why I focus so closely on COMEX positioning.
When I step back, it is truly astounding how the acceptance that silver and gold prices are manipulated by COMEX trading has grown from the levels of five or ten years ago. Go back twenty or thirty years and you could count the number of observers who believed that silver or gold was manipulated in price on one hand. Despite the growing acceptance, not everyone believes silver is manipulated in price yet, but it occurs to me that we are moving towards total acceptance as new facts are uncovered.
The most compelling facts proving that silver is manipulated in price include the data showing the COMEX has become an exclusive speculative venue where managed money speculators vie against mostly bank speculators called commercials and the fact that COMEX silver has the largest concentrated short position of any commodity. Together, these two facts prove beyond question that silver is manipulated in price. Now a new fact has emerged that ties those two facts together and illustrates and proves the manipulation like never before.
I recently observed that JPMorgan and other members of the 4 largest short sellers on the COMEX had never taken a loss on any newly added short position in COMEX silver futures over the past seven years. Let me clarify that statement; JPMorgan and other commercial traders in the big 4 have never bought back a silver short sale at a higher price than the price they first sold short at (for a loss) and only and always have bought back silver short sales at lower prices than originally sold (for profits). In other words, the four big shorts in COMEX silver have a perfect trading record – all profits, no losses. (Of course, if a managed money trader enters into the ranks of the big 4, that trader will likely incur losses – I am only speaking of the biggest commercial traders).
In baseball terms, this is the equivalent of a Major League pitcher throwing nothing but perfect games for a full season or a batter hitting 1.000 for a whole year. Or in other words, a statistical impossibility. Think I’m overstating the case? Well, just imagine anyone entering into inherently dangerous trades (shorting the most undervalued asset of all) several times a year, year after year, and always booking profits and never a single loss. Do you think you or anyone else could do that? Yet JPMorgan and the other three largest commercial traders have done nothing but that in COMEX silver.
The proof of this resides in the data from the CFTC in the concentration section of the COT report. Every time the big 4 have increased their concentrated short position in COMEX silver, which only occurs on rising prices, they have never bought back those short sales on higher prices than originally sold, only at lower prices.
The most amazing aspect to this is that I have been studying this data all along and didn’t really see it. I have commented in the past on many occasions how the big 4 never buy back silver short positions to the upside, only to the downside. In fact, that’s a key core premise of my COT analysis in that whenever the concentrated short position has increased in size, that’s negative for prospective prices and when the position has contracted, that’s usually a good signal for higher silver prices to come. I guess that means even in understanding how the silver market functions, I overlooked putting a glaring feature into proper perspective – JPMorgan and the big 4 as a whole achieved the statistically impossible; never taking a loss.
My assertion is easy enough to verify by comparing changes in the concentrated short position and price movement and it is downright shameful that I have to be the one pointing this out to the CFTC and for the agency to not properly analyze its own data. But, what’s new about that? The important point is that JPMorgan and the other big 4 never taking a loss is the ultimate proof of the COMEX silver manipulation. That’s because no one could achieve a perfect short term trading record in a free market; that would only be possible if the market was rigged.
In fact, JPMorgan’s perfect short term trading records in COMEX silver was achieved because it had no choice in never buying back short silver positions at a loss. Had it ever bought back short positions to the upside, the price of silver would have exploded and confirmed to the world that silver was manipulated in price. The only reason silver has yet to truly explode in price is because JPMorgan never covered short positions to the upside. I confess to being repetitive in declaring nothing matters more to the price of silver than whether JPMorgan adds to its short position on any and every silver price rally.
Another lie that has been exposed with the revelation that JPMorgan or the other big 4 shorts have never taken a loss in COMEX silver dealings is that any of these big traders were ever legitimately hedging. Hedging involves an offsetting position opposite of and equal to the COMEX short position. In every hedge there must be a long and short leg in place and what the hedger loses on one leg, he makes up on the other, regardless of whether prices rise or fall. Sometimes the long leg shows profits and the short leg shows losses, other times not. In other words, were the big 4’s COMEX short position ever part of a legitimate hedge transaction, it would be impossible, at least on some number of occasions, for there not to be losses on the COMEX short position and gains on the hedged portion of the trade.
Because every COMEX short position resulted in gains, it’s clear there were never any offsetting legitimate hedges as it would be doubly impossible for there to never be losses on the COMEX side of the hedge. So much for all the balderdash that the commercials are only hedging; JPMorgan and the others live to speculate and manipulate. Never taking a loss automatically means a market is manipulated and no legitimate hedging takes place; there are no other possible conclusions.
This business of JPMorgan and the other big 4 commercial traders fully explains how and why silver has been manipulated for all these years – the big shorts sell as many new shorts as possible to eventually cause prices to cease rising and whenever the technical funds are finished buying as many COMEX silver contracts and then begin to sell, the big shorts, led by JPMorgan then grease the skids for lower prices and buy back the short contracts they sold short to the upside. It’s the perfect market scam.
What makes JPMorgan the biggest market crook of all (and what enables me to get away with stating that openly) is not just the raking in of the hundreds of millions of dollars and more that JPMorgan achieved by never taking a loss; but because this crooked bank used the continuously depressed price of silver to acquire the world’s largest position of actual silver, more than 350 million oz at last count.
But due to the growing recognition that JPMorgan has almost single-handedly manipulated the price of silver over the past seven years and has picked up a massive amount of underpriced actual silver in the process, the equation going forward has changed. While it’s true that JPMorgan has picked up another $30 million in illicit profits on the COMEX on the short side over the past month, more will come to be aware of just what dirty tricks the bank employed in achieving those profits. For JPMorgan to earn profits with no controversy or criticism is one thing; to be openly accused of manipulation is an entirely different matter.
More importantly, the financial equation has changed for JPMorgan. Making $30 million on a one dollar profit on 6000 closed out COMEX short contracts within weeks is one thing; but making $350 million for each and every dollar that silver advances will eventually prove too attractive for JPMorgan to put off indefinitely. Let me empathize that - $350 million is what JPMorgan will make when silver starts to advance on every dollar advance. A ten dollar move will equal $3.5 billion for the bank; a one hundred dollar move comes to $35 billion. The math is pretty simple and strongly suggestive of sharply higher silver prices, given how much JPMorgan stands to make.
While many feel that JPMorgan will continue to manipulate and cap the price of silver forever, the actual amount of money that the bank stands to make on sharply higher silver prices dictates otherwise. Of course, the bank is likely to depress the price of silver for as long as it can accumulate more actual silver and do so without too much outside notice of what these crooked market operators are really up to. The moment one or both of those conditions change, there is no reason for silver not to take off to the upside.
June 22, 2015
This was excerpted from the Weekly Review of June 20. For subscription information please go to www.butlerresearch.com