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July 2, 2021 | Cheating

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

Silver is manipulated and suppressed in price and has been for decades because large traders on one side of the COMEX – traders labeled as “commercials” on the short side – are cheaters. Cheating is a deliberate attempt to evade the rules of the game to achieve an unfair advantage. Where do I get off calling the commercial traders in COMEX silver cheaters? I am including the referees – the regulators at the CFTC, the CME Group and the Justice Department – as complicit for allowing the cheating to continue. Simply stated, the COMEX is a crooked game run by cheaters and officiated by those condoning the cheating.

The proof of the cheating resides in the public data, specifically the data contained in the weekly Commitments of Traders (COT) report. On every significant price decline in COMEX silver (and gold) for the past four decades, the commercial traders, particularly the 4 largest shorts, have been big buyers. This was true on the most recent decline and every price decline for decades. It has been incredibly lucrative for them, amounting to billions in gains without any losses until recently. So, the question becomes – how can one small group of traders always end up as big buyers on every significant price decline? The only answer is the big commercial buyers were cheating. There is no other way for this to be accomplished – even once and not for the scores or hundreds of times this has occurred over the decades. It is impossible for the commercials to have achieved the incredible market feat of always buying big on significant price declines without cheating.

For further proof, look no further than the spate of recent convictions, settlements and fines (and now jail time) for “spoofing” on the COMEX. Something close to 99% of these cases have involved banks (COMEX commercials) and their employee-traders. Think that’s a coincidence? And what is spoofing – the entry and immediate cancellation of orders designed to manipulate prices in the short term – other than a trading device designed to cheat? And while the regulators attempt to bask in the glow of having “cracked down” on the nasty spoofers, the sad truth is that the practice still exists – minus the immediate cancellation feature.

The cheating is more pronounced in silver due to the fact that the commercials hold the largest concentrated short position in COMEX silver futures – more than in any other commodity. I’ve presented all these allegations to the CFTC through elected officials, giving the Commission every opportunity to refute my allegations (which it had done repeatedly in the past) and this time it responded that it referred the matter to its Divisions of Market Oversight and Enforcement – a really big change. Whether anything more comes of this we will only know in time, but the game of cheating by the COMEX commercials is getting long of tooth. It’s not just that the cheating has gone on for so long; the cheating has manipulated and suppressed the price of a vital and strategic commodity which is now on the verge of a physical shortage that may take many years to resolve. You don’t just artificially suppress the price of a critical world commodity for decades by means of dirty tricks with no consequences. The era of cheating trading tricks is rapidly coming to an end and a era not dominated by cheating trading tricks on the COMEX is about to begin.

It’s interesting that the biggest silver market cheater, JPMorgan, has insulated and removed itself from its former role as chief-cheater, by virtue of having accumulated massive amounts of physical silver (and gold) for the decade in which it cheated the market more than any other entity. Do you think JPM acquired 1.2 billion oz of physical silver (and 30 million oz of gold) in a manner that didn’t involve every cheating trading trick known to man? JPMorgan got the biggest spoofing fine because it was the biggest market cheat.

The ongoing cheating will end when, on the next rally, the 4 biggest COMEX silver shorts don’t add to short positions aggressively. It should be easy to see that the COMEX commercials always buying on significant price declines involves cheating, but the real key is whether the COMEX commercial cheats sell short on rallies. There is no legitimate reason for silver to have the largest concentrated short position of all commodities. The big COMEX silver shorts must cheat to buy back as much of that short position as possible on the price decline that they rig. These commercials (banks) will always cheat – it’s what they do – but their need to cheat in COMEX silver will largely end when they no longer hold massive concentrated short positions.

As bad as the cheating has been, there’s also a very positive side to it. I received an email from a longtime subscriber sensing that I had lost a bit of my enthusiasm for the prospects of a silver price surge. I hope that’s not a widely-held opinion, because nothing could be further from the truth. Perhaps it has to do with how long I have been studying silver and what I believe is the natural tendency of tempering one’s words as one ages (I was in my late 30’s when I first seriously locked onto silver some 35 years ago).

Truth be told, I consider silver to be much more of a sure thing today than ever before. Imagining sharply higher prices is as easy as falling off a log, and I am hard-pressed to imagine significantly lower prices under almost any future conditions. If I have conveyed anything but that along the way, then to use words from the movie, “Cool Hand Luke”, I have been guilty of a failure to communicate.

I’m pretty sure I have conveyed my long-held premise that the price of silver (and gold and other commodities) is largely set by paper contract positioning on the COMEX and that is borne out in the weekly Commitments of Traders (COT) report. These positioning changes, along with the concentrated short position in COMEX silver futures lies at the heart of the manipulation argument.

The recent wave of selling and lower prices and commercial cheating appear behind us. Now it becomes a question of what transpires on the next rally, which to my mind appears close at hand. I am referring to whether the big shorts add to short positions on higher silver prices, as has always occurred in the past.

I continue to believe that the CFTC privately informed the big silver shorts to knock it off around May 3 and after some fits and starts, the big shorts have largely complied. In fact, I believe the latest price blast lower was the big shorts’ final attempt to clear the decks and reduce their concentrated short position as much as they could. Therefore, I will be surprised if the big shorts add aggressively to their silver short positions ahead.

Should the big shorts refrain from adding shorts and stop their outright cheating, as I expect, then we are talking about a whole new price world for silver. Freed from the shackles of price suppression by the 4 big COMEX shorts this whole new price world should feature gains almost beyond belief. One of the great unintended consequences of our brave new financial world of previously unimaginably high prices for stocks, cryptocurrencies and real estate is that it smooths the way for shockingly higher silver prices. So let there be no mistake in my current outlook for silver prices – pick an impossibly high price and then double or triple it.

 

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July 2nd, 2021

Posted In: Butler Research

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