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June 21, 2021 | How Much Longer?

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

How much longer can silver prices be capped in the face of facts so bullish that one can only marvel at the tight grip the on price?  To be fair, silver and gold prices have advanced significantly from their price bottoms of last March, with gold hitting all-time highs last summer and silver hitting 8-year highs. Even after a trading range that has lasted for more than ten months, prices are still closer to the highs than the lows of a year ago. Still, much has changed over the past 15 months in silver. For one thing, there are the unprecedented flows of physical metal into the world’s silver ETFs and growing warehouse inventories in the COMEX-approved depositories. Combined silver ETF and COMEX warehouse holdings of 1.6 billion ounces constitute 80% of the world’s total silver bullion inventories (1,000 ounce bars).

In just 15 months, an incredible 500 million ounces – fully 25% of all the silver bullion in the world – found its way into the highly visible ownership of the world’s silver ETFs.  It’s remarkable that silver prices have been contained in the face of so much physical metal changing ownership – more than at any time in history. It makes the Hunt broters’ and Warren Buffett’s purchases of 100 million ounces seem miniscule. And there was a lot more silver in the world when those purchases were made.

Over the past 4 or 5 months, a grassroots internet movement, in the form of the Reddit-based #wallstreetsilver crowd, now numbering more than 100,000 participants, has turned the retail silver market on its head and appears to be almost single-handedly responsible for the growth in silver deposited into the PSLV. No one has ever witnessed this type of a retail silver market. Furthermore, it shows absolutely no sign of petering out. In the face of the continued silver price suppression it only seems to be intensifying the motivation of the Reddit crowd and why not? The great mystery is how can the price of silver remain so low in the face of such buying? No commodity, in the history of the world, has witnessed as much investment buying relative to how much was available. Yet despite this unprecedented buying, prices are no higher than they were 10 months ago. It’s as if the law of supply and demand had been repealed.

So, what is causing the law of supply and demand to be so disconnected from the price of silver? The price is controlled by 8 participants on the short-selling side. In reality, just 4 large traders on the short side dominate the sell side and while I don’t mention it often enough, the short side is further dominated by one or two large traders. This concentration meets the definition of price manipulation, as set out by the CFTC itself. The concentrated short position in COMEX silver can’t be explained as legitimate. We know that the CFTC is now considering all this. Even if the CFTC Commission hasn’t communicated forcefully to the big silver shorts about reducing those positions, it stands to reason it likely questioned the biggest shorts about why they are so heavily short silver. That would certainly discourage more of the same.

Finally, I can’t help but envision a future culmination of many of the current powerful forces in play coming to silver in a big way. The rampart speculation in meme stocks, crypto-currencies and assets of all types seems a prelude to what will happen in silver. Someday soon, silver’s price action will be a thing to behold. If meme stocks can soar with no real fundamentals, what can an item essential to modern life and in critical physical short supply do?

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June 21st, 2021

Posted In: Butler Research

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