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COMEX Silver "Market" Dynamics - Craig Hemke (05/03/2019)

Multiple stacks of silver bars

March 05, 2019

Surely, by now, you know the drill. The price of COMEX Digital Silver rallies. Price breaks key technical level. Banks then increase the float of available contracts. Price stalls. Price crashes. Wash. Rinse. Repeat.

On the chart, it looks like this:

So The Banks increased the total float by 45,000 contracts on the way up and have decreased it by 35,000 contracts on the way down. So where did these 45,000 contracts, representing 225,000,000 ounces of digital silver, come from? That's easy. FantasyLand! The Banks, with no intention to ever deliver any actual physical silver, create digital silver from nothing. They then sell the contracts to Spec hedge and trading funds, which purchase these derivatives on margin and with no intention of ever demanding physical delivery of actual silver. These funds only seek "silver exposure".

(You should now ask yourself: "Since that's the case, how is the trading of these fraudulent contracts allowed to determine the physical price?” Good question.)

On January 3rd, COMEX Digital Silver broke up and through its 200-day moving average. The Spec trading and hedge funds got all excited and demanded more COMEX silver exposure. The Banks, confident that they'd never be asked to deliver any actual metal (and supremely confident that they could win this game again), issued new contracts to meet the Spec demand.

And this is Econ 101. If the supply of any good increases by the same percentage as the demand for said good, price should remain constant. (This comprehensive explanation from two years ago: https://www.tfmetalsreport.com/blog/8252/econ-101-silver-market-manipulation)

And why do The Banks continue to play these games with price? That's easy. PROFIT! Let's just say that JPMorgan alone added 20,000 of the 40,000 contracts in January. With their 150,000,000 ounces in the vault, they could short up to 30,000 contracts on The COMEX and theoretically call it a "hedge". Let's say their average short point in January was $15.90/oz. (I don't know. I'm just guessing off of the chart). And now, over the last week, they've closed out these shorts, buying them back as The Specs rushed for the exits, particularly after the 50-day and 200-day were broken back on Friday. For the sake of simplicity, let's assume that the average cost to buy back and cover these 20,000 contracts was $15.40

This would mean that JPM just made 50¢ on 20,000 contracts, with each contract representing 5,000 ounces. Thus, by this simple example, the prop desk at JPM just made a cool $50,000,000 in a relatively riskless trade... riskless because they have near-complete monopolistic control of the silver COMEX, by virtue of their holding 49% of the total vault. https://www.sprottmoney.com/Blog/jpmorgans-dominat...

Does this mean that silver is doomed and will never be allowed to break free and sustain a rally? Not necessarily. However,it should give you pause to consider again just how difficult it will be to finally break free of this down trend that JPM and their fellow conspirators have enforced for the past three years.

But there is such a thing as "Economic Mother Nature", and you can see her on the chart above. Since JPM established this line 2.5 years ago, all dips save one have been followed by a sharp reversal... that ONE being last July-August. With price near $15, which should be pretty strong support, we should be looking for a tradable bottom very soon. If you missed it, our case for a bullish 2019 was laid out again just last week: https://www.sprottmoney.com/Blog/gold-and-silver-2...

Any bounce in COMEX Digital Silver prices will find resistance again at many of the same levels that provided resistance in December and January... and you KNOW that JPM will be on the offer again with another 20,000 shorts, with the plan of extracting another $50,000,000 profit. However, this doesn't mean that we can't also profit by knowing in advance what the plan will be the next time price moves toward $16.30.

In the end, we should still expect Spec digital and investor physical demand to overrun The Banks' devious and criminal manipulation. But, obviously, it's NOT going to be easy, and as COMEX Digital Gold eventually moves toward $1500 in the months ahead, the gold:silver will likely see insane new all-time highs of 85:1 or even 90:1. You must understand that the historical anomaly of this ratio is entirely due to the fraudulent pricing system, and that this, too, will normalize once the scheme finally fails.

For now, just look for this soon-to-be-realized short-term bottom in silver. It may be two more weeks before the turn back higher is obvious, as we might not see it until after the March FOMC. However, it's coming, and for the gamblers and traders out there, the possibility will exist for a trading profit again... just as we saw in November-January as we chronicled the move from $14.40 to $14.80, through $15.00 and $15.80, and then toward (and falling just short) of our $16.30-$16.50 target. See this from early December 2018: https://www.sprottmoney.com/Blog/gold-and-silver-p...

The next two years will be rewarding for precious metal investors. While it will be possible to accumulate fiat through aggressive trading, your best strategy remains the consistent acquisition of physical metal. And owning real, physical gold and silver is easy! It can be held at a trusted gold bullion storage company or in your own, personal safe. You can hold it in gold bullion coins or silver bullion bars. Take your pick. Just be sure that you regularly acquire physical metal as central bank policies turn and this new bull market in precious metals continues.


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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


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