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December 7, 2023 | More Evidence of a Silver Shortage

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

Recently, the Silver Institute updated its annual review on silver that it originally published in April. The report indicated a reduction in total supply (mine production plus recycling) and an increase in industrial demand. The new report indicates total silver supply for 2023 as being 23 million ounces less than originally reported, largely due to the loss of production at Penasquito, the big silver Mexican mine hobbled by a strike this year. Total industrial demand was 21 million ounces more than estimated back in April. The new report indicated that total silver mine production fell to its second lowest year over the past ten years, while silver industrial demand grew to the highest level ever – clear evidence that the price of silver is too low – otherwise such developments would not occur.

There is also the matter of existing stockpiles of silver, which could be available for sale. However, over the past 2 to 3 years, there has been a dramatic reduction in total recorded world silver inventories of close to 400 million ounces, to 1.3 billion ounces, a total reduction of 30%. This reduction in world silver inventories (the largest in history) is due to selling by the large insiders which control the wholesale physical silver trade – mainly JPMorgan. Over the past 3 or so years, JPMorgan has disposed of as much as 50% or 500 million ounces of its billion ounces hoard of physical silver.

This wasn’t a pure disposal. While JPM was selling physical silver, it was accumulating a massive long paper derivatives position in the OTC market, mostly with Bank of America on the short side. As a result, over the past 3 years, while JPMorgan disposed of 500 million ounces of physical silver, it has acquired a billion ounces of long OTC silver derivatives – in essence, transforming a billion-ounce physical silver position to a 1.5-billion-ounce net long position – 500 million ounces in physical and one billion ounces in OTC derivatives. JPM has increased its total silver holdings in the process of buying valuable time while its historic deferred criminal prosecution agreement with the Department of Justice for precious metals manipulation ran out two months ago. Any suggestion that JPMorgan is not the master precious metals market criminal of all time is laughable.

Let’s face it, with the Silver Institute publishing data more bullish than ever – in its history of never speaking of anything overtly bullish for all the decades I’ve followed it – the actual situation in silver must be bullish indeed. Since the kingpin of all things silver, JPMorgan, would seem to be ideally positioned for an upside rocket ride, it’s hard for me to understand why such a move would be delayed for much longer. Everything indicates that when we do “go” in silver, we will go big and fast, with no hesitation or backing and filling.  Look at the data just published by the Silver Institute – no friend to higher silver prices – and try to explain how much longer can industrial demand grow and mine supply stagnate before higher prices are required. And remember that increased industrial silver demand reduces the amount of silver available to investors. The long-term manipulation on the COMEX may have succeeded to this point in suppressing the price of silver, but it is the law of supply and demand that will have the last word and fairly soon.

Editor’s note: Ted Butler was the first silver analyst to discover and publicize the fact that in 2008, JPMorgan had taken over Bear Stearns’ dominant short position in silver. For years, he wrote about an ongoing manipulation that suppressed the price of silver on the COMEX and sent these missives to Jamie Dimon at JPMorgan, the Justice Department, the Commodity Futures Trading Commission (CFTC) and the officials of the COMEX. Finally, a handful of traders who worked for JPMorgan were indicted for spoofing, a trading practice of introducing large orders to move the market and immediately canceling them. Unfortunately, nothing was said about Mr. Butler’s charge that JPMorgan had manipulated the price of silver downward through futures trading (paper transactions) while at the same time accumulating a billion ounces of actual physical silver at an attractive low price. The scale of this chicanery and manipulative prowess takes your breath away. Despite these charges, JPMorgan has never issued a word of denial.

Were it not for Mr. Butler, none of this would have been written about today. He suggests that the vast accumulation of silver by this important bank and its acolytes is just another super-bullish reason to own silver. If silver goes up, JPMorgan will make more money than anybody and they wouldn’t own it if they didn’t think it was going up.

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December 7th, 2023

Posted In: Butler Research

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