The CPM Group and its proprietor, Jeffrey Christian, has operated as one of the “analytic” fronts for the western Central Banks’ paper derivative gold and silver manipulation scheme for many years. Someone sent me the CPM Group’s latest commentary on silver in which it expresses the view that the price of silver will “fall dramatically” after the September silver contract “roll” on the Comex is over. You can read the brief report here:
CPM Market Commentary 2019-5, Who Is Buying Silver, It’s The Comex Shorts, 2019-08-28
To begin with, the paper price of silver is not being driven higher by short-covering on the Comex. In fact, the big banks/commercials, as well as the “other reportables” and retail traders per the last COT report added over 10,000 contracts to their short position last week. Let’s be clear on one thing, and the years of evidence supporting this is overwhelming, the only time “short covering” drove the price of silver higher was in early 2011 when the big banks were forced to scramble for cover and ran the price of silver close to $50.
The price of silver drops when the big banks short thousands of contracts in an effort to cap a price rally or drive the price lower.
CPM makes the argument that physical demand for silver is not a factor in the recent move higher in the price of silver based on demand for US Silver Eagles per the U.S. Mint report. This assertion is an insult to the intelligence of anyone who studies the silver market thoroughly. U.S. retail investor silver eagle demand represents less than 5% of the amount of silver produced annually. Industrial demand plus jewelry/ silverware use accounts for roughly 75% of the amount of silver “consumed” annually. It can be argued that U.S. retail demand for coins has very little, if any, influence on the price movement in silver.
Finally, the “roll” of Comex silver open interest from the expiring front month to the next front month – in this case September to December – affects the price of silver maybe to the extent that a significant portion of the expiring front month open interest does not “roll” out to December and instead sells outright. First notice day is tomorrow, which means any account holding contracts must either roll or have its account funded to receive delivery of physical silver as early as this evening (the day before official 1st notice).
You’ll note in the report that Christian states that there’s “226.5 million ounces of September open interest to be rolled forward…” This is incorrect – egregiously incorrect in fact. As of Wednesday’s close per the CME’s open interest report, there were 91,109 contracts open in September. Anyone who’s traded Comex paper silver knows each contract represents 5,000 ozs. The o/i at the end of Wednesday was 97,109 contracts, or 485.5 million ozs of paper silver. In all likelihood at least 1/3 to a half of that – or more – will have rolled or sold by the close of Comex pit trading today.
But Christian uses the big numbers to make the situation sound extremely bearish for silver. It’s not. In fact, it will be interesting to see how many contracts will be left standing after today. Liquidation of September silver contracts by hedge funds (“managed money”) is likely causing the price decline in silver and gold today. We’ll know for sure tomorrow when the CME o/i report is released. I would not be surprised if more the 50% of the September o/i has liquidated today.
The amount of silver designated as available for delivery (“registered”) as of Wednesday was 91 million ozs. If just 20% of the open September silver contracts stand for delivery (which is unlikely) the Comex will have a supply problem. However, in all likelihood, most of the open contracts after today’s close will either liquidate – if they are not noticed – or agree to settle in cash (an EFP or PNT). The bottom line is that the September/December “roll” will have little to no affect on the directional movement of the silver price.
Jeffrey Christian’s CPM Report on silver is little more than fear propaganda which is woefully short on facts and long on fairytale-based analysis. He concludes that “weak investment demand created short positions on the Comex and weak investment demand suggests that prices will not continue to rise.” Not one letter of one word in that assertion contains even the smallest shred of truth. Certainly just the flow of capital into the various silver ETFs over the summer contradicts Christian’s absurd claim.
What is driving the price of silver higher? Physical demand from India and China. Both countries are implementing large-scale solar power build-outs. Furthermore, India’s population has shifted a considerable amount of demand from gold buying to silver purchases since the Government raised the import duty on gold bars.
Similarly, China’s consumption of silver has likely soared after the Government restricted the supply of gold into the SGE in order to “feed the beast” – i.e. what is likely massive unreported gold accumulation by the PBoC. It’s impossible to track China’s real demand for gold and silver since 2014, when the Government opened up Shanghai and Beijing for gold and silver importation. The amount of metal that flows through those ports is not published by design.
In truth, the inexorable rise this summer in the price of gold and silver is being driven by enormous physical demand not from retail minnows but by large entities primarily in the eastern hemisphere which are accumulating an enormous amount of physical gold and silver. Certainly “footprints” in the snow on the LBMA would support this conclusion. Do not be bamboozled or scared into selling your physical gold and silver or your mining stocks by charlatans like Jeffrey Christian.