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March 31, 2021 | Turmoil

No one has followed the silver market trading mechanics for as long or as closely as Ted Butler.

The core issue in silver remains the concentrated short position in COMEX silver futures – the persistent massive short position held by 4 traders that has artificially suppressed the price for decades. The short position in silver is larger than that of any other commodity in terms of real world production. The CFTC is the source of the data on concentration. This data is the agency’s front line of defense against price manipulation. Yet the Commission is unable to offer a reasonable rebuttal to the charge that the concentrated short position is suppressing the price of silver.

I don’t know of anyone involved in silver that has a high opinion on how the CFTC has handled things. The CFTC is more reviled than any other federal agency. The mission of the CFTC is to protect the markets in order to safeguard the public’s interest. Clearly, something is wrong when public sentiment is as negatively aligned against the CFTC as it is now. The public knows that something is wrong in silver and is irate that the Commission won’t correct it. Much of the anger is due to the Commission not even trying to explain the legitimacy of the largest concentrated short position of any commodity.

About the only cure for the public’s outrage is for the silver manipulation to end and the concentrated short position to be reduced to levels comparable to other commodities. It is clear that the Commission has to do something in the near future to address the negative public sentiment, if for no other reason than it will be asked by elected representatives to respond to constituent concerns. My local congressman has acknowledged my request that the agency respond to the letter I made public on March 5 and I believe he has forwarded it to the agency requesting comment. I’m fairly certain others have done so as well.

For 35 years, the price of silver has been suppressed by concentrated short-selling on the COMEX. The effect of this long term price suppression has been to alter the supply/demand fundamentals of a world commodity to a degree never witnessed. Under the law of supply and demand, which is as powerful as Mother Nature herself, a long-term price suppression must result at some point in there not being enough actual supply to meet demand – a shortage. The longer the artificial price suppression lasts, the greater supply is crimped and demand is enhanced, making the eventual shortage more pronounced. The added kicker in silver is that it is the only commodity that has both a vital industrial demand, as well as investment demand. No other commodity shares this dual demand profile like silver.

It appears the physical silver shortage may be already upon us. Certainly, there can be no denying that we are in the midst of the most severe retail physical shortage in history, in terms of premiums and delivery delays. But what sets the price are developments in the wholesale silver market for 1,000 ounce bars. Here, all the signs point to extreme tightness indicating we are on the cusp of shortage. About the only thing missing is an inventory buying panic on the part of the silver industrial users, which won’t be missing for long. That will drive the price of silver to a point high enough to burn out demand.

I am hard-pressed to uncover what it is that the CFTC could do to alter the coming physical silver shortage and the fallout from its failure to address the concentrated short position. If it continues to side with the big silver shorts it will further stoke outrage against it. Perhaps it’s not too late for the Commission to do the right thing and acknowledge the reality of the ongoing silver price manipulation.

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March 31st, 2021

Posted In: Butler Research

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