Just three weeks ago the silver open interest was 174, 000. But, get this. The day when the Keith Neumeyer/First Majestic letter surfaced the open interest was 178,343. In just 6 trading days it has risen nearly 14,000 contracts, soaring into one all-time high after another…Is the OI soaring because JPM is letting First Majestic, and the silver investment world, know what they think of that letter? Or is it soaring because THEY are having trouble keeping the price down due to all the buying which is showing up in the futures market? – Bill “Midas” Murphy, Lemetropolecafe.com
The open interest in Comex silver futures hit an new all-time high as of the close of Thursday’s trading at 191,663 contracts. This is 958 million ounces of paper silver – about 19% greater than the world’s annual production of silver. To say this amount of open interest in silver is “absurd” is an insult to the word “absurd.”
This farcical degree of manipulation exceeds any market abuse I can recall in nearly 30 years of market experience. The only explanation for the regulators – the CFTC and Justice Department – turning a blind eye to this is that the price suppression of gold and silver is being implemented on behalf of the Government. This is not an original viewpoint, as the probability of this has been suggested by some well-followed analysts in the past.
The [Commitment of Traders] report indicated that 8 traders in COMEX silver futures held a net short position of 376 million equivalent ounces of silver, by far the most of any commodity in terms of world production (163 days)…It occurs to me that such massive speculation in COMEX silver futures may not be in keeping with the spirit and intent of commodity law and may suggest something is wrong with the price discovery process. – excerpt from a letter written by Gregory Roberts, Chairman of First Mexico Gold Corp. to the Chairman of the CFTC (underlined emphasis is mine)
As Mr. Roberts asserts, something is wrong with the “price discovery process.” As James Turk reported on Friday to an email group of which I’m a member, “Trading ended today here in London with July silver $0.06 under spot, and delivery is only 2-1/2 weeks away. Gold was almost as tight going into June delivery, and while the initial pressure has relaxed somewhat, gold remains very tight.”
Spot silver on Friday was 6 cents/oz above the price of a July forward contract for which delivery is required in 2 1/2 weeks. This “backwardation” means that there’s an immediate shortage of physical silver. Furthermore, investors would prefer hold on to their physical silver rather than sell at the spot price and buy a July forward which would enable them to replace at a lower the silver they sell. On an annualized rate basis, the discount works out about 8%. Backwardation in a commodities futures market is failure of the price discovery process, among other problems.
What this really means is that investors are not willing to take the risk that they might face problems getting their silver delivered and would prefer to hold on to what what they possess in hand rather than make a quick arbitrage profit. In other words, the market does not trust paper silver.
In the face of the extreme degree of illegal naked short-selling paper silver futures on the Comex, India is on track to import – by a wide margin – a record amount of silver. Steve St. Angelo of the SRSrocco Report (link to Steve’s article) writes:
If Indian silver demand remains strong for the rest of the year, total imports may reach 9,000 mt (300 Moz) in 2015. Total global silver mine supply was 877 Moz in 2014. Thus, Indian silver imports in 2015 could consume a third of world mine supply compared to 25% the previous year.
Steve will be a guest on the Shadow of Truth this Thursday.
As our latest guest, Jeff Brown, has reported from Beijing, China will be using 3,162 metric tonnes of silver per year just for its solar energy installation plan. In other words, India and China combined, would be soaking up 50% of the world’s annual silver production in 2015. And China’s number only includes its silver usage for solar energy. That does not take into account China’s demand for other industrial uses plus investment demand.
Clearly the U.S. Government – via the Comex – is using paper silver to implement an unprecedented price manipulation operation in silver. Part of the reason for this is because Constitution mandates silver as an official form of currency, along with gold. If the price of silver were allowed to seek true price discovery, it would completely undermine the legitimacy of the U.S. dollar (Federal Reserve Notes), a fiat currency. Like all market interventions, this going to end in disaster for this country.
While it’s not worth speculating on the timing for when the manipulation effort ultimately falls apart, Craig Hemke of the TF Metals Report outlines a compelling case for why another short-squeeze in silver is about to occur: He We Go Again – Another Short Squeeze Looms.
Investors and speculators who understand what is happening right now have an opportunity to make enormous profits by going long silver. Other than the precious metals mining stocks, I have never seen a an asset that is as undervalued as silver right now relative to the underlying intrinsic fundamentals, including and especially the imbalance between the supply and demand for physically deliverable silver bullion.