The Silver Short Bubble

68
Wed, Jun 24, 2015 - 11:33am

For the first time ever, total Comex silver open interest exceeded 200M contracts yesterday, settling at 200,273. This means that the coming Spec short squeeze is going to be violent and substantial. And why isn't anyone calling this a "bubble"?

The final open interest numbers for yesterday are in and they are truly remarkable. Gold, which declined by $7, saw its OI rise by over 11,000 contracts to 430,978. This is the highest Comex gold OI since late March. Since yesterday was a CoT survey day, there's no doubt in my mind that this week's report will show another substantial and bullish improvement in the gold CoT structure. Why? For the Wed-Tue "CoT week", gold was down $5 but total Comex OI ROSE by over 15,000 contracts with 2/3 of the rise coming Fri-Tue when price was declining by over $25. That's A LOT of fresh Spec shorting in gold and it will likely move the gold CoT to a bullish structure not seen since the early November lows last year.

That's all well and good but, obviously, the point of this post is silver so let's get right to it...

Yesterday, as price was being smashed nearly 2.5% or 40¢, total Comex silver OI rose by another 4,909 contracts to close at 200,273. That's the first time in the history of the Comex that total OI has exceeded 200,000 contracts.

  • First of all, why now? Why is silver OI at record highs when price is at 5-year lows? And where are all the "bubble callers"? They were out in force four years ago with price in the $40s and total OI at 140,000. Why can't this current time be called a "short bubble"? It clearly is. I guess it's only a "bubble" when it fits the narrative you're trying to promote.
  • Let's do some math. There are 5,000 ounces of paper silver behind every Comex contract. Multiply 5,000 X 200,000 and you get a total Comex obligation of over 1,000,000,000 ounces of silver. Hmmm. Last year's global mine supply was just under 900,000,000 ounces and the TOTAL Comex vault shows holdings of 181,000,000 ounces. How is it even legal to print 200,000 contracts when there's only enough silver in the vaults to cover less than 40,000?
  • On the topic of mine supply, the WGC estimates total global gold mine supply at about 92,000,000 ounces. Total Comex gold OI at 430,978 represents 43,000,000 ounces or about 47% of total annual mine supply. In silver, as noted above the percentage is about 112% of total annual mine supply.

From a CoT standpoint, this is all extraordinarily bullish for paper silver. As mentioned earlier, the next report is due Friday and it will be based upon these numbers from last evening. For the CoT week, silver was down 21¢. Remarkably, over this same period, total silver OI spiked by 9,500 contracts from 191,774 to yesterday's 200,273. From a CoT perspective, we are back to a very bullish extreme in silver, too.

And what about the short squeeze that we've been expecting. OH, IT'S DEFINITELY COMING and the growth of Spec short open interest this week only adds more fuel for the fire. All we need is a spark. We almost had that spark last week after the Fedlines but silver failed to cross its 50-day moving average and fell back. The "doubling-down" on Spec short positions this week is simply accelerant for the fire once it begins. The chart below can't make it much more clear for everyone:

In other news today, the Greek situation is reaching a true crisis point (https://www.theautomaticearth.com/2015/06/the-only-good-deal-for-greece-...) and the US economy is slipping into recession (https://www.zerohedge.com/news/2015-06-24/excluding-obamacare-and-harsh-...) Meh, whatever. The HFT algos don't give a damn about such arcane notions as fundamentals, all they see is a declining yen and they sell "gold" accordingly:

I need to get this posted so I'll just leave you with this...

In the 3.5 years since MFingGlobal when I officially quit trading, rarely have I been so tempted to wander full force into The Casino. This current situation is so extreme and the "short bubble" so HUGE that it is very difficult for me to remain on the sidelines. However, on the sidelines I shall remain. This personal restriction does not apply to you, however, my dear reader. Best of luck, be patient and prepare accordingly.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  68 Comments

CPE
Jun 24, 2015 - 11:35am

Thx

Turd

Arag
Jun 24, 2015 - 11:38am

I second...

...what CPE said !

cashonly
Jun 24, 2015 - 11:39am

Thurd

a nice solid thurd.

silver66
Jun 24, 2015 - 11:42am

Sorry Marchas 45

Had to take your spot

silver66

J.P. Cubish
Jun 24, 2015 - 11:56am

Thanks Turd

Exciting times in silver.

tyberious
Jun 24, 2015 - 11:56am
tyberious
Jun 24, 2015 - 12:01pm

From Dave's column

This is excellent:

“James Mc,” a valuable daily contributor to Lemetroplecafe.com’s nightly “Midas” report commented last night on the Comex silver market in comparison to the CME lumber futures market:

Total North American lumber production for 2015 (est.) is 60 billion board feet. At an average of $400 mbf that translates into $24 billion dollars. Keep in mind this excludes the rest of the world’s lumber production, which could easily be double that amount. On the other hand total world silver mine production for 2014 was estimated by GFMS to be 877 million ounces. At $16 oz. that is a total of $14 billion. Silver OI is 45.45 times greater than lumber OI. with physical silver production being only a fraction of lumber production in dollars. Lumber futures O.I would have to be 100 times greater or more to compare to the outlandish oversized silver futures. Or, put another way lumber futures would have to reflect hedging 68 billion board feet, more than the entire year’s production for North America to be scaled to silver Any arguments for a higher silver O.I due to hedging for recycled and above ground silver supply are dwarfed by the stark reality of the above figures. To say the silver market is normal is like having referred to hurricane Katrina as a passing thunderstorm.


Jun 24, 2015 - 12:14pm

By the way

I'll likely remove the restriction and send this over to GATA later today or tomorrow.

heathbr
Jun 24, 2015 - 12:17pm

We need Howie

Greek Deal or no Deal, just let them pick a case and get it over!



Jun 24, 2015 - 12:19pm
Marchas45
Jun 24, 2015 - 12:25pm

Hi! Turd

Had an awful time trying to open up your site and posting. O! Well at least that is my excuse. Lol Keep Stacking

After Reading the above maybe it's time for another Recliner Report and stacking some more of the My Precious My Precious. Keep Stacking

tyberious
Jun 24, 2015 - 12:27pm

Adapting To Changing Markets

Wednesday 24 June 2015

"There is a legitimate question as to the existence of free trading markets, anymore. Over the past several years, there has been an almost total takeover of the stock market by the Fed and a few controlling Wall Street entities. It is beyond question that the precious metals market have purposefully been suppressed by the same factions in order to achieve distorted and untenable political means.

We do not trade the long side of the stock market, with a few exceptions, nor do we trade the short side of gold and silver as a stance against central planners’ intended manipulation of these markets. Forex currencies are totally bank controlled, so our participation there is limited. The Fed is in total control of the broken interest rate sector, so we do not trade the interest rate markets, at all.

These decisions limit what can be traded with what remains, and with what remains, we do not trade most of the New York softs: coffee, cocoa, and sugar, sugar being more of an exception. Crude oil has also become a political tool and can occasionally be volatile, so we are a cautious participant in making trade recommendations in that arena.

What we have been doing is placing what markets in which we do make trade recommendations into a specific context whereby a set of rules have been formulated in order to make any recommended trade decisions. We began implementing this format this month, June, while still tweaking the rules to fit developing market conditions. It is an ongoing process."

https://edgetraderplus.com/market-commentaries/adapting-to-changing-markets

tired-and-weary
Jun 24, 2015 - 12:34pm

MFingGlobal

As a new subscriber, is there anywhere I can read about Turd's decision to quit trading?


Jun 24, 2015 - 12:34pm

I am scratching my head.

The OPM 100 ounce bars are .35 over spot at Provident? What's up with that? I have never seen them below .49 over spot. the 10 ounce bars are equally cheap. Doesn't sound like silver is scarce at all. But the bars are listed as "stock delayed." other bars are out of stock. The also have AU one ounce bars for only $17 over spot... $16 if you order a batch of them.

How odd... lowest premiums I have ever seen.

tired-and-weary
Jun 24, 2015 - 12:40pm

I'll save you the time

I had always had my futures account with Lind-Waldock. They were then merged into MF Global.

Fortunately, the metals peaked in April and September of 2011 so, by the time MFG collapsed and stole everyone's money, I had withdrawn nearly everything, only leaving $3,000 cash in my account.

At that point, I swore off trading forever and have only very occasionally dabbled in options ever since, only buying one call at a time. On a larger scale, this came at the right time however. Managing this site is a full-time, 12 hour/day commitment so, frankly, I simply don't have enough time to actively trade, anyway.

tired-and-weary TF
Jun 24, 2015 - 12:57pm

MFingGlobal

Thanks for the response. Yours tired and wearily... How much longer can the madness continue?

2c piece
Jun 24, 2015 - 1:04pm

Re question for Rob Kirby

A appreciate the thoughts of the member who responded to the question. Guess I should give some background for the question.

I was thinking about the 1.5 quadrillion dollar derivative market in a world where the world’s GDP is about 60 Trillion dollars. I could see how the banks could rehypothecate to get a number that high but I could not see who could come up with that amount to take the other side of the trade. I emailed Jim Wiley with that question. He was kind enough to respond within a couple of minutes. He explained to me that the banks were on both sides of the trade as in a fixed auction controlling the price and setting it wherever they wanted. (I am paraphrasing).

My next thought was why would they take the trouble to do this? The most advantageous for them answer I could come up with was, with the bail-ins in place, this would be a simple mechanism to appropriate most of the populations bank deposits. Hence the question.

Goldencross
Jun 24, 2015 - 1:10pm

It's all BS! Washington

It's all BS! Washington ordered Brussels to keep Greece in the Euro. So Greece stays in the Euro. Simple!

Owtovit
Jun 24, 2015 - 1:10pm

Turd...

With a situation like this just go for it and dip ya toe back into the "Murket"...self imposed exile be damned, I bet Mrs F and the LT's would like a surprise holiday/present

Mrs Doyle Advertises Father Ted - Go On, Go On, Go On.........
Owtovit
Jun 24, 2015 - 1:16pm

I hear ya

It's extraordinarily tempting. Maybe some September calls? I'd imagine that the $17 variety are relatively inexpensive.

Ned Braden
Jun 24, 2015 - 1:24pm
amarula4 TF
Jun 24, 2015 - 1:31pm

@I hear ya Submitted by Turd Ferguson

you've still got it, Big T - use the Force

Texas Sandman
Jun 24, 2015 - 1:32pm

Celebrating 40 years of rape and pillage Crimex Gold Futures

We make money the old fashioned way... We steal it!

Owtovit
Jun 24, 2015 - 1:38pm

@i hear ya

You the trader......me the muppet ala GS....that's why I only stack...time for a Hard Assets Alliance raid....

tyberious
Jun 24, 2015 - 1:39pm

$440 Million is All That's

$440 Million is All That's Stopping the World's Biggest Fiat Ponzi Scheme From Imploding


When it comes to the economy and precious metals manipulation, Andy Hoffman is second to none in terms of his knowledge and understanding of what is going on and where things are heading. The gold cartel is running on fumes, according to Andy Hoffman. The COMEX, as described by Andy, is a paper exchange with essentially no inventory. For the first time in history, June’s gold delivery demand exceeded the COMEX's record low registered inventory. The COMEX has been used to manipulate prices downwards, and the truth is every attempt in history made to suppress precious metals prices downwards has always failed. Exposing the truth behind the COMEX's paper exchange could be the trigger that sends precious metals through the roof.

The record low inventory of registered gold is just 370,000 ounces -- worth a mere $440 million at current prices. The reality is that this is virtually nothing, and any large buyer or group of buyers could take this out by demanding delivery. Only a mere $440 million of gold -- if it even exists -- is all that is keeping history's largest fiat Ponzi scheme from imploding and sending gold soaring.

https://www.crushthestreet.com/videos/live-interviews/inevitable-goldsil...

tyberious
Jun 24, 2015 - 1:41pm

Good in theory but Comex

Good in theory but Comex rules only allow for 1,500 contracts per customer. I'd LOVE to see it happen, though.

Mickey
Jun 24, 2015 - 1:45pm

Kirby Question

Is there a website somewhere that shows how many arrive at teh plus 1,000 trillion derivative number when ht eOCC shows much less. I assume some of that is Europe.

But many of the folks in this toss out that 1,000+ trillion number and its been accepted as the holy grail. I'd like to verify that.


Jun 24, 2015 - 1:46pm

My country...universally despised

Seriously, what's the point of this? The arrogance is breathtaking. Perhaps all countries spy on each other but through facilities like this?

https://www.thelocal.fr/20150624/us-embassy-in-paris-home-to-secret-spy-...


Jun 24, 2015 - 1:48pm

Very nice day for silver...

...considering the circumstances.


Jun 24, 2015 - 1:48pm

Excellent Bill H

We have all from time to time tried to help others, friends and family, by pointing them toward reality. For our troubles and efforts we have been viewed as the "squirrely" guy/gal with a tinfoil hat who see's everything as a conspiracy. We have lost friends and even had family cringe when holiday get togethers were planned because no one wants to be exposed to our "craziness". Worse than any disease or even leprosy, anyone spouting Austrian economics or even "common sense" (almost extinct today) has been shoved into the outcast corner by the mass delusional majority. Over the last few years, "theory after theory" has become fact after FACT after FACT! There can no longer be any question, conspiracy to delude and defraud has run rampant and is a day to day operation in the Western world.
Originally my thought was to write this piece about and around the perfect response, "but you do agree the government is bankrupt, right?". I say this because almost anyone (in the U.S.), no matter what age, sex, religion, race or financial status will generally agree with this. For those who don't agree, it is better to leave well enough alone, this is a subset living in their own delusional world.
For those who do agree "the government is broke", they are broken down into basic subsets. There are those who "get it" fully. There are those who know the government is broke but don't really understand what it means or the ramifications (they can't connect the dots). Another group are those who agree and know in the back of their mind this is true ...but they don't REALLY believe it because they simply cannot ..."it's too awful to comprehend". Then, we have another group, probably the largest of all, those who agree but think it really doesn't matter. They may also believe no financial crisis will ever occur because "the government will never let it happen". Let's talk about this group next.
The "can't happen here" crowd only need the dots connected for them. I believe it is best to ask them questions in an effort to lead them to their own answer and understanding. This is much better than lecturing or "telling" them because they will actually have to think to answer your questions. Questions such as:
1. if the government is broke, how will they make good on their obligations such as payrolls, Social Security, food stamps, paying the military and most importantly paying on their debt? Forget the first four, "do you realize Treasury securities are what funds Social Security, your pension, the bank's balance sheet which holds your money ...AND what underlies the dollar itself?"!
2. If the above doesn't work, you might ask if the economy currently "feels good"? Then ask, do you realize the federal government spends almost 20% of GDP (and their spending is "counted" as part of GDP). If they are broke and have to drastically cut back on spending, will the economy not shrink by the amount the government can no longer spend? Do you see without government spending, under any definition we would be in a depression greater than the 1930's?
I don't want to go through the entire exercise but please understand, "guiding" someone to their own conclusion which happens to be correct is best done with questions, MANY OF THEM. If you can, take two, three or even more philosophical roads to help them reach the same conclusion each time ...the understanding will be that much more cemented in their mind when they finally do(hopefully) arrive!
Switching gears just a bit, we have seen the "mentality" change somewhat over the last year or so. Even the mainstream is showing some signs of a shift. This "shift" has even become evident amongst and within the "old boys club". For example, who would have imagined Germany, Netherlands, Belgium and Austria would ever ask for their gold back? Or Texas building its own depository and using the words "not" and "confiscate" in the legislation for proposed repatriation?
Several very well known and at one time mainstream money managers have publicly told of the dangerous situation. The latest is a bond manager who has gone entirely to cash, how's this for putting a crash helmet on?
https://www.bloomberg.com/news/articles/2015-06-22/tcw-braces-for-bond-market-collapse-by-piling-the-cash-up-high Just a few weeks ago, Bloomberg put out an article asking if China could gold back the yuan. This was significant because no news source (other than maybe Kitco) has been as bearish and slandering regarding gold than Bloomberg. https://www.bloomberg.com/news/articles/2015-05-20/chinese-gold-standard-would-need-a-rate-50-times-bullion-s-price
Going to the beginning and back to the top, who exactly was correct in 1999-2000? Who was correct from 2005-2008 about an impending crisis? The answer of course is the very same people screaming bloody murder today "the financial system will come apart from the seams". Are those who were correct before, now "crying wolf"? Or are they saying the same things for the same reason and forecasting the same results as before? "They" (we) were not crazy then and are not crazy now. In fact, it is even much easier to see now than previous. As a side note if you recall, we heard in late 2008 and 2009, "who could have seen it coming"? Or, "no one could have seen it coming". This is dead wrong! In fact, even within the mainstream press there was a concerted effort to silence the truth. For example, Greg Hunter while at CNN tried to warn of the banking collapse. He was told "don't go there" and was rewarded by having his contract not renewed!
"Some" saw the dotcom bubble coming, more saw and warned of the 2008 crisis coming ...and even more see this one coming. Not only are there more and louder voices today, the numbers are growing slowly but surely and even engulfing some mainstreamers who used to laugh at "us tinfoilers"!
I know how difficult it is and has been. The financial landscape is perverted beyond recognition and any time you open your mouth, you are proven wrong. Gold goes down the following day along with a new high in stocks so you look "stupid". You are not. "We" cannot make price, we can only tell the truth as we see it and suggest via common sense and logic the need to prepare for the worst. As I see it, the outcome is not in any doubt and becomes clearer each day. My fear is we are not in 2008 anymore, the coming collapse will change the world order to one unrecognizable to today. The U.S. is in fact "broke" as we spoke of at the beginning. The "realization" of this not only can happen but WILL happen. Sadly, because of how badly the U.S. has treated the world over these last years, we will be given no mercy when negotiating our bankruptcy. It will be a real live wolf at our door!
Regards, Bill Holter
Holter-Sinclair collaboration

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