Final week, I made public an edited model of the extra in depth weekly evaluate despatched to subscribers earlier. As beforehand said, I imagine there’s a present market emergency within the COMEX silver market based mostly upon official information indicating an enormous enhance in futures positioning of greater than 130 million oz (26,000 contracts) as reported within the new COT report, as of July 21.
https://silverseek.com/article/code-red
Whereas I attempted my finest to depend on the exhausting information and supply probably the most cheap interpretation of that information, that is very sophisticated stuff, so it’s comprehensible that issues could not appear as clear to others as they’re to me. I’m positive many (if not most) are unclear on what I imply by a market emergency, the likes of which hasn’t existed within the COMEX silver market because the Hunt Bros emergency of 1980, 43 years in the past. So, let me use as a substitute a more moderen market emergency – that of the LME nickel market of March 2022, as a recent instance of what I’m speaking about. Right here’s a superb run down of what transpired on the time.
https://www.ndtv.com/enterprise/18-minutes-of-trading-chaos-which-broke-the-nickel-market-2824194
It’s no exaggeration to say that the LME nickel catastrophe is principally the identical, in lots of respects, as to what I see forward for the COMEX silver market. The nickel market was in a bodily scarcity situation at the moment, similar because the wholesale bodily silver market is right now. The lengthy and quick derivatives place in LME nickel grew to unreasonable ranges, with a famous concentrated quick place held by a big Chinese language dealer, recognized as “Mr. Large Shot”. Simply this previous week, the COMEX silver futures market had an enormous enhance in complete derivatives positions and the concentrated quick place additionally grew massively as effectively.
In the long run, the LME nickel shorts had been now not capable of cap and include costs and the worth all of the sudden exploded – doubling and tripling in a matter of hours. This led to the LME busting trades, basically, cancelling and reneging on contractual obligations, setting off an avalanche of lawsuits and immediately trashing the fame of an alternate that existed for 150 years. In fact, I wrote about it on the time, making the clear analogy to what I noticed coming in COMEX silver.
https://silverseek.com/article/real-lesson-lme-nickel
I do know many suppose that I could also be going overboard in describing what I see forward for silver, however an goal evaluate of what happened in LME nickel final yr would appear to offer ample proof for what may occur in COMEX silver. Whereas the fundamentals in each markets appear equivalent – a bodily scarcity, coupled with an enormous derivatives place (together with excessive focus on the quick facet) – there’s much more to be stated concerning the coming COMEX silver emergency.
For one factor, I’m not conscious of any prior warnings to the LME or the UK regulators about what turned out to be the nickel market emergency/debacle beforehand, whereas I do know such warnings have been made within the coming COMEX silver market emergency (as a result of I’ve made many such warnings). I ship all my articles to all of the commissioners on the CFTC, together with key officers on the Market Oversight and Enforcement Divisions, together with the CEO of the CME Group, Inc. (proprietor/operator of the COMEX). If the federal commodities regulator, in addition to the designated business self-regulator, are unconcerned about my warnings, it will seem cheap that each ought to clarify why or take instant measures to attempt to head off the approaching market emergency. The very last thing I might wish to do is cry “fireplace” in a crowded theater for no good motive.
Additional, the LME nickel debacle affected only a few market members, whereas silver traders/members in all places, within the many thousands and thousands worldwide, are affected by the continued COMEX silver manipulation and the market emergency I see lifeless forward. This raises the stakes immeasurably for everybody, notably the regulators.
Most regarding of all, within the LME nickel default and debacle, the principal participant was the large Chinese language speculative quick vendor, drastically assisted by the large banks, most notably, JPMorgan; whereas within the coming COMEX debacle, the banks look like instantly positioned as the large silver quick sellers. This has been the case for 40 years and regardless of billions of {dollars} of fines, settlements towards too many banks to depend and now jail time for financial institution workers – all for manipulating silver, gold and different valuable metals costs on the COMEX and NYMEX – the banks nonetheless look like the large quick sellers to this present day.
As anticipated, the COT report for July 21 fully-confirmed excessive and even file business promoting, notably when it comes to concentrated and collusive new shorting by the 4 and eight largest COMEX business shorts. The 8 largest business shorts offered quick extra silver contracts, 12,100 (60 million oz), in a single week than they’d in years and possibly ever. I had made the case that the large commercials wouldn’t quick huge once more (on account of the large 4 not shorting on the $6 silver rally from March to Could), however, clearly, these expectations had been fallacious.
Due to this fact, an inexpensive observer must ask what was the motivation for the file one-week business promoting. With silver so low-cost in value within the face of a documented bodily scarcity and with sturdy technical purchase alerts (shifting common penetrations) generated within the reporting week, the patrons, be they pushed by provide/demand fundamentals or technical alerts, want no rationalization. It’s the aggressive promoting by the COMEX commercials (banks) that requires rationalization and just one rationalization is feasible, particularly, the commercials offered so aggressively to stop an excellent bigger run up in value that may have triggered huge new shopping for in silver away from the COMEX.
What I simply described is nothing however in-your-face value manipulation – promoting with the only intent to stop silver costs from growing. There could be no different rationalization. The truth that COMEX silver is meant to be a regulated market, by not simply the first federal regulator, the CFTC, in addition to the designated self-regulator, the CME Group, and each regulators sit by and do nothing however act because the three blind, deaf and dumb monkeys is nothing lower than a nationwide shame. The CFTC and CME Group can proceed to shame themselves, however that’s their alternative, as I do intend to press the difficulty to the perfect of my talents.
Worst of all, the huge business promoting this week is what creates the Code Purple market emergency in COMEX silver, as there is no such thing as a manner that I can see that the huge positioning will get resolved with out excessive value violence. The accountability for the disorderly market situations that I now see as being “baked” into COMEX silver on account of the huge one-week surge in business promoting, lies squarely on the CFTC and the CME Group.
I’ve been after each regulators for the higher a part of 40 years to deal with the continued COMEX silver manipulation and regardless of having to take care of their incompetence and malfeasance for all this time, I by no means thought each regulators would fail to behave so irresponsibly as they’re now. Neither would dare to overtly debate the allegations of a market emergency, the avoidance of which couldn’t be of extra significance to every.
What do I imply by a Code Purple market emergency? A market situation that should resolve itself in disorderly costs. These disorderly costs would possibly embody a blast to the draw back, because the collusive commercials rig costs decrease to induce the current patrons to bail out, earlier than the bodily scarcity situations trigger costs to soar. Or, the try to rig costs decrease could fail and silver costs surge with no huge decline first.
In any occasion, the actual blame for the disorderly costs forward are the regulators, each the CFTC and the CME Group, which fail to deal with and even acknowledge the blatant manipulation in COMEX silver. I do intend to push each to do the precise factor, however based mostly upon their observe information, they are going to be reluctant to deal with this critical problem. The one saving grace for larger silver costs is the bodily scarcity, which grows extra pronounced day by day. Certainly, continued suppressed costs won’t resolve the bodily scarcity, no matter continued regulatory failure.
Ted Butler
July 24, 2023
www.butlerresearch.com
