The silver paper futures open interest is now officially over a 1 billion ozs., most of which represents a naked short position in silver. Never in the history of the markets has any futures market been this extraordinarily disconnected from the amount of underlying physical commodity that is available to deliver against those contract open interest.
The only conclusion that can be drawn is that the Fed, Treasury and big banks are implementing the most extreme market manipulation exercise ever witnessed. I shudder to think about what catastrophe is coming at us that they know about but we don’t – yet.
“James Mc,” a valuable daily contributor to Lemetroplecafe.com’s nightly “Midas” report commented last night on the Comex silver market in comparison to the CME lumber futures market:
Total North American lumber production for 2015 (est.) is 60 billion board feet. At an average of $400 mbf that translates into $24 billion dollars. Keep in mind this excludes the rest of the world’s lumber production, which could easily be double that amount. On the other hand total world silver mine production for 2014 was estimated by GFMS to be 877 million ounces. At $16 oz. that is a total of $14 billion. Silver OI is 45.45 times greater than lumber OI. with physical silver production being only a fraction of lumber production in dollars. Lumber futures O.I would have to be 100 times greater or more to compare to the outlandish oversized silver futures. Or, put another way lumber futures would have to reflect hedging 68 billion board feet, more than the entire year’s production for North America to be scaled to silver Any arguments for a higher silver O.I due to hedging for recycled and above ground silver supply are dwarfed by the stark reality of the above figures. To say the silver market is normal is like having referred to hurricane Katrina as a passing thunderstorm.
A long-time friend of mine who works with hedge funds in NYC thinks a Comex default is coming. If that’s the case, it would make sense that JP Morgan, HSBC and Scotia – the primary Comex market-makers and Comex gold/silver vault custodians – are amassing a record level of naked-short interest in paper silver.
Why? Because this serves the two purposes:
1) these banks make enormous trading profits through their illegal manipulation of the gold and silver markets. In fact, I don’t know about HSBC and Scotia, but in some past quarters JP Morgan’s commodities trading unit has been its only cash-profitable business segment. I suspect this was largely from illegal trading profits in gold and silver futures trading.
2) keeping the price of silver down via illegal manipulation enables these banks to accumulate physical silver at artificially low prices. Obviously they know the truth about the real condition of the physical market. If you put on your “think like a criminal” hat, you would use the paper to push the price of silver down using paper – taking out trading gains on the market’s volatility – and you would be accumulating a massive hoard of physical silver because, once the Comex eventually defaults, both gold and silver will soar in price but silver will soar many multiples more than gold.
The Comex is headed for a default. This means that the long side of the open interest will be settled in cash. Of course, it takes a force majeure to trigger the cash settlement provision in the gold and silver contracts. I can’t wait to see the nature of that force majeure event…
We are dealing with as heinous a suppression scheme as we have had to deal with all these years. While we have to deal with the here and now, there is no doubt in my mind there will be reckoning for all of this, as James Mc posits … especially in silver. The odds grow that reckoning will occur when least expected and it will be spectacular. – Bill “Midas” Murphy, www.lemetropolecafe.com