Ted (Butler) explains how the next run to $50 and beyond is not only probable,
but amazingly simple. Here’s how the next run could unfold…
Twice in the past the price of silver has risen in a short period to $50.
It happened in 1980 during the Hunt brother’s manipulation and again three
decades later in April 2011, when the price rose to nearly $50. Prior to
the price run up in 2011, I wrote that a move to $50 was more than possible,
since it had already occurred and that proved such a move was possible.
Something that has happened twice before can certainly occur again. One
thing that makes it probable is that there was three times the amount of
silver above ground in 1980 than there is today. The six billion ounces
that existed in 1980 has shrunk to two billion ounces of industry standard
1000 ounces bars. The amount of world money creation and buying power has
increased exponentially over the past seven years. It is nothing short of
extraordinary that there is less than a third of world silver inventories
remaining today than there was in 1980 while the price has remained far
below the peak it reached back then.
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In 1980, there were less than 3 billion ounces of gold in all forms above ground
throughout the world – the cumulative production of thousands of years. Today,
38 years later, the total amount of above ground gold has doubled, thanks to an
explosion of gold mine production. While silver mine production has similarly
exploded over the past 38 years, there is much less silver around now. The
explanation for why there is so much less silver and so much more gold is that
silver is a vital industrial commodity, consumed in a wide variety of applications,
while gold is not. Silver lost its primary consumption use – photography, due to
digital displacement, but despie this loss, a myriad number of new uses powered
silver’s continued consumption. Unlike silver, the price of gold is substantially
higher than it was at its peak in 1980.
There is no minimizing the powerful dynamics in place for the next move higher in
silver. That move should extend far beyond the $50 barrier of the past and, when
the move does start, it will most likely unfold much quicker than the previous big
moves. When it occurs, most observers will be dazed and confused. The principle
dynamic of this coming big move in silver and gold will be the role of JPMorgan.
Over the past ten years, as a result of its government-assisted takeover of Bear
Stearns, JPMorgan has been the dominant futures (paper) short seller on the COMEX,
becoming so powerful that it has compiled a perfect trading record – never once
taking a loss and amassing many billions of dollars of trading profits. As
remarkable as this unblemished trading record of the past decade has been, it
actually pales in comparison to what JPMorgan has been able to accomplish in the
physical market. It has used the highly depressed prices it largely created to
accumulate on the cheap 750 million ounces of physical silver and 20 million
ounces of physical gold.
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The accumulation of such a massive private hoard of physical silver and gold,
by far the largest such amounts in history, is the single most powerful argument
that the coming move higher will be one for the record books. JPMorgan is the
unchallenged master of the financial universe and it didn’t go to the trouble
of accumulating such massive and historic quantities of physical silver and gold
for a quick trade or a small gain. It did so in order to make the largest profit
in history. I understand that many doubt my claims that JPMorgan has amassed 750
million ounces of physical silver and 20 million ounces of gold. After all, aside
from the near 150 million documentable ounces of silver that JPMorgan holds in
its own COMEX warehouse proof of the other 600 million ounces that JPM owns is
notably missing. Certainly, if the entire 750 million ounces could be seen by
everyone, there would be no debate. It is precisely because most of the silver
held by JPMorgan can’t be seen that makes my claim noteworthy.
As it stands, JPMorgan’s accumulation of physical silver and gold is mostly
unknown. I think this is a good thing because when silver does fly higher, no
one will be pointing the finger at JPMorgan. They will skate undetected to many
tens of billions of dollars of profits with the world blissfully unaware of the
real story. It is in JPMorgan’s self-interest to hide from view as much of its
silver and gold accumulation as possible. Even though the 600 million silver
ounces held by JPMorgan are hidden, I have described in detail to subscribers
(and in public articles) the three main means by which it has acquired the
metal on a weekly basis going back at least five years. First was via skimming
off a small portion of the unprecedented, yet documented weekly physical movement
in and out of the COMEX silver warehouses – an inventory movement not seen in
any other commodity. Over the past 7.5 years, more than 1.5 billion ounces of
silver have physically been moved in and out of the COMEX silver warehouses of
which JPMorgan has skimmed off at least 200 million ounces (apart from the 144
million ounces it holds in its own COMEX warehouse).
Next, JPMorgan bought at least 150 million ounces of Silver American Eagles and
Canadian Maple Leafs from 2011 thru 2016, melting every coin into industry
standard 1,000 ounce bars. JPMorgan’s buying alone accounted for the string
of record sales years and when it stopped buying, sales of these coins collapsed.
Finally, as the official custodian for SLV, the world’s largest silver exchange
traded fund (ETF), JPMorgan was ideally positioned to convert shares in the trust
to metal and avoid all ownership reporting requirements. This alone is the
explanation for the continuous counterintuitive deposits and withdrawals in
SLV over the past seven and a half years. All told, JPMorgan picked up at least
250 million ounces of physical silver in this manner. All three of these
accumulation methods by JPM were reported weekly to subscribers for years,
and I suppose anyone not privy to the reporting would doubt it had occurred.
Not much I can do about that.
As great as JPMorgan’s massive and historic holdings of physical silver are,
remarkably, there is more. Not coincidently, the “more” also involves JPMorgan.
At this time, it is accepted that the futures market structure in COMEX silver
and gold (and other metals) is the most bullish it has been in history.
Specifically, the level of short selling by the managed money technical funds
is the highest it has been in history. This is clearly bullish as these technical
fund shorts have no choice but to buy back their short positions at some point
and switch (or try to switch) to the long side. Thus, a massive amount of potential
buying is already in place, awaiting only the eventual occurrence of higher prices
to be set off.
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While the current bullish market structure in COMEX silver and gold is reasonably
well known and written about, much less is known about JPMorgan’s role in forming
this bullish market structure. CFTC data verifies that JPMorgan has been, by far,
the largest purchaser of COMEX silver and gold futures contracts over the past
couple of months. In other words, not only has JPMorgan been the largest buyer
in history of physical silver and gold over the past seven years it has also
been the largest buyer of COMEX futures contracts on the deliberately-engineered
price decline of late.
By my calculations and based upon CFTC data, JPMorgan has bought back 20,000
COMEX silver short contracts (the equivalent of 100 million ounces) and 90,000
COMEX gold short contracts (the equivalent of 9 million ounces). How many more
COMEX futures contracts can be bought by JPMorgan is anyone’s guess, but based
upon the record short selling by the managed money traders, it wouldn’t appear
that JPMorgan can buy many more COMEX contracts. After all, the record managed
money selling is what enabled JPMorgan to buy so many contracts in the first
place; once that selling dries up, JPMorgan is unlikely to be able to buy many
more contracts as a result.
It is the highly concentrated nature of JPMorgan’s futures contract buying that
sets the stage for an upside price jolt that promises to unfold faster to the
upside than any previous move. So deft has JPMorgan been in buying gold futures
contracts recently that I have taken to describing it as a double cross of other
traders. But once the move higher unfolds, it promises to be the largest rally
in silver and gold in history by virtue of the massive physical hoard accumulated
by JPMorgan.
Amazingly, all it will take for this price explosion scenario to unfold is for
JPMorgan not to add aggressively to short positions when the inevitable rally
begins. You heard me right – the silver price explosion to $50 and beyond,
along with a commensurate move in gold is only contingent on JPMorgan doing
nothing on the next rally. Admittedly, JPMorgan has been in many similar set
ups in the past and has always added aggressively to its COMEX short positions,
eventually capping those rallies. This has prompted many to assume that JPMorgan
will always sell short aggressively on future rallies. But the current set up
has never favored JPMorgan this much. If what JPMorgan has always done holds
true again we will get a rally of some significance anyway, just not the big
one. But if JPMorgan doesn’t add to short positions on the next rally, the
third run to $50 silver and beyond should be at hand.