I don’t see this month as a severe beating – same as last month, for somewhat similar reasons. Last month my call about 2 days before was $23.60-$23.80 and we landed around $23.76. The reason was FOMC was 35 mins after options ended, and my guess proved correct that no one wanted to get squeezed an hour later if minutes were fairly dovish. That being said, a flogging did THEN commence in front of the LBMA metals options the Monday after. You can see Comex OpEx in the red circle and the LBMA options expiration in the blue circle. Note that on Weds AFTER the COMEX expirations some beatings ensued.
My reasoning was simple. It was too much risk to push the price TOO FAR ahead of it, only to be blown out.
However, we saw some attempts to attack on Feb 3rd and 4th be met with SOLID buying. I don’t have the backend evidence of this, but to me, these strong buys are BoA and perhaps Citi hedging long on the COMEX to push price up. Ted Butler talks about the BoA short position ($18b in leasing on OCC report – no evidence of short selling on that report) but Ted doesn’t address Citi having a $10b position itself. If BoA was all leased metals from JPM that are silver, couldn’t the SAME be said of Citi?
But again – there are two assumptions here. One is JPM had a pile of 1.2b oz. The second here is that I made an assumption that JPM was told they needed to dissolve this hoard. Meaning, if they did get in trouble for rigging the silver price one too many times, what would that mean?
My THEORY is that, along with the Bart Chilton interview – is that the regulators said JPM would need to dissolve the hoard that they had, but could not take a profit or loss on it. Perhaps their costs were $15 per ounce to acquire all of that. The idea is they then would have to lease this metals to other banks, who then could sell this over the course of time. There would be a buyout price in the lease. Meaning, this would have an effect of selling the silver into the market to meet supply needs over years, and not flood the market overnight and crash silver to $3 per ounce.
In THIS scenario, you would go from a situation where 1.2b oz were tightly locked in a vault, and at any given time, this could be sold into SLV or hedged short against to push the price down. The concept is, for example – that you let price run up $2-3, you then short hard, knock people out of those positions, then buy your shorts back and buy physical metal at the lower price. The more times you do this, over years, the more metal you can accumulate at a price YOU SET due to being able to “legitimately hedge” your pile. The position limits that COMEX sets – I believe that is paper contracts and amount on the COMEX. I don’t think there’s a rule anywhere that says you cannot amass a billion ounces and stick it in your basement.
However, they took these rules to the extreme, and my HYPOTHESIS is that regulators suggested nicely the pile get dissolved. It is possible this is the case for gold as well, but I don’t follow that market like I do silver.
Overall, I believe the $50 price in 2011 was legit – and I also believe Chris’ research showing JPM took the price of silver down, hard. What I would suggest in an alternative universe is that at $50, legit selling would have taken place to perhaps take the metals back to $40 for 1-2 years before a leg up to $100. In this universe, JPM had a pile they continued to play this game with – using paper shorting to take the physical price to as low as $11.75.
I bring up all of this above because I brought up evidence of massive amounts of selling no one is really tracking. I first saw this last summer, where in a 45 day period, I tracked over 130m oz in EFPs being re-routed from COMEX contracts to LBMA EFP contracts. This was the evidence – I was tracking the EFP numbers daily.
Just out of curiosity, I looked at this past week’s EFP numbers. Take a look for yourself on the open interest tab on the CME page.
This shows that LAST WEEK, 18m oz of COMEX open interest was moved to the LMBA for EFPs. Exchange for Physical. I need someone to explain this to me like I’m a 5 year old. What I am seeing is people who buy silver contracts long, seem to want to settle for physical, and this contract is slid to the LMBA for physical settlement there. Completely obscured from the COMEX inventory numbers.
Why should anyone care? The silver Institute puts out these supply and demand numbers every year that seem to make it look like there is an equilibrium of sorts. Bix Weir points out that the Silver Institute was formed from the “Silver Users Association”. I don’t have time this morning to research this – but anyone want to do a write up on this and email me at email@example.com, I will edit into here and give you credit. The idea is, the USERS want cheap silver prices for their products, so it is in their best interests to paint a picture where there is virtually no deficit.
If there is no deficit, then I’d like to take a look at this carefully…
If you look at this, it shows a 23m oz surplus?? lol
Now, let’s put the metals leasing into perspective. If you are BoA and Citi sitting on 1.2b oz of silver, you want to sell this at good prices, and perhaps push prices up with hedging long on the COMEX IF you are selling short physical. There is evidence of MASSIVE selling outside of what is being reported above. Remember, the COMEX was not really a delivery mechanism until March 2020. Since then, we have seen monster months of delivery. And, most importantly, in the one year of silver squeeze – we have seen the registered inventories go from 150m to 84m. Nearly 70m oz drained from the COMEX.
IF there is a perfect equilibrium, why is the COMEX being drained? Furthermore – why would I see evidence of 130m oz being transferred to the LMBA in ONE MONTH for PHYSICAL DELIVERY last summer? Why would you see BoA selling 25m oz in December on the COMEX? And, for the love of god, why would you have seen 18m oz settled EFP just this past week???
To me, we are desperately short silver – and these hoards are being drawn down faster than anyone can believe. SLV even added 52m oz 2 weeks ago – and I presume it’s from a pile that was already there, owned by JPM and leased out to Citi/BoA that was then sold to SLV. Temporarily – that has two owners for each bar? This type of thing explains the accounting error last February/March when SLV told people they put 110m oz in the vaults in 3 days. The pile didn’t move. It was potentially part of a short sale to SLV via Citi/BoA from the pile leased from JPM. In the LMBA vaults!!!
So to me, this is why silver is the ONLY commodity not above its 1980 highs. I believe JPM had this giant hoard that is now being freely sold into the market – and this is why Jeff Christian could confidently say there was plenty of silver. I’d like to revisit that theory, given we are seeing this possibly leased metals being sold from every orifice into the markets at lightning speeds.
Why is this relevant, today?
This was 16 months of beatings and drubbings at OpEx. Remember, this was in a consolidation. And, remember, banks could throw money into the market and 5x it on YOLO plays during this time. Now that this punch bowl is being taken back, I’m expecting the metals to run like thoroughbreds into this.
Now, the narrative is changing. It is not hard to see that there will be a swarm of investors coming to risk off. Everyone knows this is coming. Tech sector may be getting rolled out of. War drums. Inflation increasing every month for a year. While the Biden admin wants to tout low unemployment, they are playing with numbers because after a year of being unemployed here, you drop off of the rolls as someone who doesn’t WANT to work. That actually once happened to me after the dotcom bust. I was out of work for 15 months. They ASSUME that after 12 months, you are a piece of shit and don’t want to work. I can assure you, if a professional is laid off making $60,000 per year, they cannot accept a full time job as a Walmart greeter making $25,000 per year and pay the bills. So they have to continue to look for work.
The evidence of this is the labor force participation rate, which is still far lower than before COVID. I know with a small child, our daycare closed a bunch of times on COVID scares, and my baby had COVID – so I can imagine how women may have dropped out of the workforce during this time due to childcare. But the UNEMPLOYMENT numbers look “good”. They are NOT good.
This is important to understand all of this with where the hurricane storm cone is going. You see some TA guys who get their crystal balls out and speak with authority that we MUST go lower before going higher. A few of them – I won’t mention names, I despise because they draw silly lines with no context of the bigger worldly picture and speak with a level of pomposity and arrogance I cannot stand. The TA guys I like to follow use this in a realm of probabilities and possibilities and certainties – this is your NorthStar BadCharts guys.
Anyway – IF we are in a position where the metal complex as a whole are about to be lifted, and your short pile is diminishing, you can hedge long into this and force prices up – just like a BoA had a hoard and could hedge short to drive prices lower. Where a Bix might be vilifying BoA right now for their “short” position, I’m looking at it like these guys, if selling short under these conditions – ARE actually the entity to push prices up.
Feb 3rd and 4th to me had major cliff drops bought up instantly. This to me was an opportunity for them to hedge long at $22, then push the price up to $24, then sell more of the hoard short into the higher prices. When they hedge long at $22, they can then wait until the price is $24 and collect the bars they just bought at $22 and rinse and repeat. This will have the net effect of driving down the short piles as well as taking possession of COMEX/LMBA bars they restock with and sell all over again at higher prices.
All of this is now leading to price predictions for Weds. With tanks on the boarder of Ukraine, no one wanted to short into a 3 day weekend. This leaves Tuesday and Weds for fireworks to happen – IF they happen. I think it’s likely we hit around the $22.99-$23 number. Where we are at $24 now, this is shorting a buck in a day and a half of trading.
If you look at the calls, you see $24 is a BIG number, then a lot of fuel is spent between $23.50 and $23.00 to push down.
Take a look now – they drew up contracts for $60 and $100 calls. I’ll take that premium, thank you very much!!
Here are the puts…
I’m seeing $23 as ripe here to take out. Now, can we short $.94 in a month? I’ve seen three times over the last 2 years where there was this small of shorting.
- Christmas 21 – virtually no shorting, as they had suppressed the price much after the Nov smash and there were no real weak hands to get in for a rug pull. This was about $.40 or so on that day.
2. Nov 21 – We then go back to Nov, we see $1.80, but that was in 9 trading days.
3. Aug 21 – $1.15 in 5 days. Asterisk here…
The asterisk with this was there was a $3.50 beating at the beginning of August. They got some weak hands back in for mini rug pull.
4. April 21 – $.90 drop in 7 days. This was in the middle of a nice run up from beginning of April to end of May. So – it’s quite possible to me this is the closest model of what we have now.
5. Jan 21 – We had a $1.41 in 5 days, but right after was silver squeeze. You can see the beatings for the months leading into this. $2.38, $5.42, $3.29, $3.59, $2.40.
So – what can we do in two days??
To me, I believe December 2021 set the precedent, and January’s FOMC dulled a move, which the LBMA then smashed.
IF things settle over this weekend, they use that as cover to take gold down to $1800 by options and run all the stops they can. This could take silver easily to $23.
IF things do NOT settle, but intensify, we may just see no shorting at all and actually a rise in price. Why? If you come in to work Tuesday and there’s articles of tanks about to invade, are you really shorting thousands of contracts to get blown out Weds?
I think they had a good run for 16 months on the chart above, but risk here is too great. I think the low end for silver is $23, but there’s a possibility NO ONE shorts on Weds which lifts price close to $25. The $25 call is 1,616, and I think that is a hard line in the sand. That would blow all puts out of the water. I think it’s more likely we stop at $24.50 where we have 863 calls.
So…IF tensions subside, we might be looking at $23-$23.50. If tensions are the same or worse, I can see $24.50.
The BIG takeaway here is that it appears that BoA and Citi are walking around the bar with Desert Eagles on their hips just waiting for someone to smash price so they can blow them up.
We might have turned the corner folks, and BoA and Citi may actually be our enforcers who are drawing down the hoard and hedging long into price smashes now.