Ted Butler: Falling Into Place

Ted Butler: Falling Into Place from Silver Seek

One wants to be careful about seeing things as previously predicted, but not so careful so as to not recognize when things seem to be playing out exactly as expected. Recent news stories and events seem to be in accord with a number of my central themes, but I’ll present the case as I see it and let you decide.

Put simply, in addition to alleging a multi-decade price manipulation in COMEX silver (and gold), I have claimed that JPMorgan attained the role of chief manipulator as a result of its takeover of Bear Stearns in 2008, in which JPM ascended to the role of largest COMEX short seller/manipulator. Then in 2011, as silver prices neared $50, JPMorgan set about to not only abort the rally in silver and gold that year, but to immunize itself from future worry about its massive COMEX short position put at risk when prices rose again. It did so by beginning to accumulate more physical gold and silver than anyone in modern times. All told, I estimate that JPMorgan has managed to accumulate 25 million oz of physical gold and 1 billion oz of physical silver from 2011 thru the present.

A little over a year ago, I began alleging that JPMorgan started to position itself so as to massively double cross its former big commercial short partners in crime who had always worked collusively with JPM in continuously hoodwinking the managed money traders, their main COMEX counterparties over the decades. Finally, nearly a year ago I began to calculate, twice a week, the running open losses to the 8 big shorts in COMEX gold and silver, first by estimating the open losses of the 7 biggest shorts net of JPMorgan’s short position (since JPM was more than protected by its massive physical positions), but more recently just on the basis of the 8 biggest shorts – since JPMorgan completely covered its COMEX short positions.

All that was left for gold and, particularly for silver prices to explode upward was JPMorgan putting on the finishing touches and deciding when the moment of lift-off would be. Whether these premises turn out to be correct or incorrect, I reached them independently as time evolved, as I’m sure that subscribers would attest. Certainly, if I’ve misrepresented anything, please let me hear from you, as that would be the last thing I would intend. Oh, and along the way, I petitioned (some might say badgered) the regulators at the Justice Department, CFTC, CME Group and JPMorgan itself.

With that backdrop, I can’t help but feel recent news articles and developments seem to confirm the premises laid out above. Certainly, all the recent stories on bank losses in precious metals trading are very much in synch with my running calculations of growing open losses to the biggest short sellers in gold and silver. It’s no wonder Scotiabank is tripping over itself in trying to beat it out the door from precious metals trading. And it’s certainly not confined to Scotia, but includes HSBC and a new name, CIBC.

https://www.kitco.com/news/2020-05-29/Canada-s-CIBC-lost-64-million-in-a-day-on-paper-in-gold-market-turmoil.html

What’s interesting about the CIBC story is the acknowledgement that the $60 million loss occurred on March 24.  Previously, HSBC was reported to have lost $200 million on one day in late March, but the exact day was not mentioned. What’s interesting is that on March 24, gold rocketed around $85 that day in COMEX trading and surged another $90+ the next day, March 25. You may recall that this stunning $180 two day rally in gold (and $1.80 rally in silver) came shortly after the deliberately rigged $230 plunge in gold prices over the 9 trading days until March 24 (silver had fallen $5.50 in the days into March 24).

Shortly after the early-March plunge and sharp snapback in gold and silver prices and based upon COT report data flow, I reported that the principal architect and beneficiary of the price plunge and snapback appeared to be none other than JPMorgan, which along with the smaller commercials (which I refer to as the raptors), were the main buyers on the price plunge, essentially shutting out the 8 or so biggest shorts. It was this egregious and deliberate price plunge that enabled JPMorgan to completely buy back its entire COMEX silver and gold short position, at the expense of its former big short accomplices. Never was JPMorgan in a better position to double cross its former comrades in collusion.

I can’t help but feel that recent events and news stories largely confirm, essentially, all my premises. Slowly, but surely, news is starting to emerge of large losses to a number of banks due to precious metals trading. I would remind you that the genesis of the losses was a year ago, when the big commercials waded onto the short side of gold and silver aggressively, just as they had done on numerous occasions over the past few decades.

But instead of quickly ringing the cash register as they had always done in the past for say a few hundreds of millions of dollars by rigging prices lower and inducing managed money selling, the managed money selling never materialized. Instead, the big commercials found themselves stuck in a position that continued to generate ever larger open losses.

At least the commercials could count on the help of JPMorgan which held large gold and silver positions for much of the time until mid-March. But having engineered and orchestrated the sharp and near unprecedented price smash of mid-March, JPMorgan rid itself of its COMEX gold and silver short positions, leaving the big remaining shorts to fend for themselves. The record would seem to indicate that the big commercial shorts aren’t fending particularly well.

Now it would seem that JPMorgan has employed the knockout double cross punch by allowing a few unsuspecting banks to “borrow” physical silver from JPM to provide to the silver ETFs on a non-recourse basis to the ETFs, but very much on a recourse basis from the borrowing banks to JPM. Unwittingly to the borrowing banks, but very much appreciated by JPM is that the banks borrowing physical metal have just entered into a deal they would be much better off having made with the devil himself.

More than 100 million ounces of physical silver have been purchased and deposited into the world’s silver ETFs, mostly into SLV, over the past two months. It is impossible that such a large purchase would not have had a much more dramatic upward impact on price if the metal wasn’t being “leased” into the market. No other explanation could explain the lack of price response to such a large quantity of physical silver. And JPMorgan is the only entity capable of such a transaction. It knows, but likely not the borrowing banks, that those borrowing the silver are now short in a manner that will cause great financial damage when silver prices rise.

One question that might arise is the extent of JPMorgan’s potential additional “leasing” of physical metal to other banks. Why would JPM stop at 100 million oz when they still have 900 million oz of physical silver remaining? Why would it not put the borrowing banks even deeper into the potential abyss by lending and creating silver short positions on hundreds of millions more ounces? I would contend that JPMorgan has some very practical limits on how deeply it allows the unsuspecting banks to dig a further short hole for themselves.

The success of any great financial scam, such as the scams that JPMorgan has pulled off to this point in both its illegal accumulation of physical metals and now in the leasing of some of that physical accumulation to create short positions from which there is no easy escape, rests on the victims remaining largely unaware that they have been criminally scammed. If it becomes too obvious that fraudulent means were deployed, that might provide a legitimate basis for reneging on the transaction. The trick is to take as much from the mark as is possible without alerting him that he has been scammed. As my dear departed silver mentor and friend, Izzy Friedman, would say – you have to think like a criminal when studying criminals.

What I have described above are the makings for the most bullish case possible for silver. Up until now, it has largely been a gold show, with the big losses to the commercial shorts coming overwhelmingly from gold and not silver. Certainly, gold has climbed several hundred dollars from last summer, while silver has just recently started to move higher and is still largely unchanged from yearend.

But whereas enough physical gold exists in the world to make delivery at least plausible to close out the big short positions, that same equation wouldn’t appear to exist in silver. With the 8 big shorts holding close to 400 million oz short on the COMEX and what now appears to be a separate short position of 100 million oz created over the past two months from leasing, it’s hard to see where the 500 million oz of silver necessary for actual delivery to close out the short position could come from. I suppose it could eventually come from JPMorgan – but at what price?

At the risk of tempting the deity of humiliation for retribution and comeuppance, it seems things have been falling into place until this point and I would be surprised if things further falling into place don’t include sharply higher silver prices ahead.

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Silver Seek

Various authors reporting on the silver precious metals market.