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Discussing Comex Silver

74
Thu, Apr 5, 2018 - 10:42am

With the open interest in Comex silver blowing out to a new alltime high yesterday, we thought it best to discuss again what this indicates and what it doesn't.

As of yesterday's Comex close, the total open interest in Comex silver is at an alltime high of 241,135 contracts. This blows away the previous alltime high seen on April 20 of last year at 234,787 contracts. Let's first hit the basics...

At 241,135 contracts, total Comex open interest represents 1,205,675,000 ounces of digital silver. The entire world will produce about 825,000,000 ounces of silver this year so this open interest is now at a record 146% of global mine supply. To understand how ridiculously over-leveraged this derivative market has become, compare Comex silver to Comex gold and Comex copper:

  • Comex gold OI 500,627 contracts = 50MM digital ounces vs mine supply of 90MM ounces = 55% of global mine supply
  • Comex copper OI 289,814 contracts = 7B pounds vs 40B pounds of mine supply = 18% of total mine supply

OK, now that you have some sense of the scale of this madness, let's move on. How about some history?

April 20, 2017 was a Thursday. This means that two days earlier, with Comex silver OI at 227,984 and price at $18.40, there was a CoT survey. And what did this CoT show last year?

Large Spec Long = 128,378 Large Spec Short = 24,491 NET LONG 103,887 contracts

Commercial Long = 46,878 Commercial Short = 163710 (an alltime high) NET SHORT 116,832 contracts (also an alltime high)

So, with Large Specs NET LONG nearly 104,000 contracts and the Banks et al NET SHORT at an alltime high, what do you suppose happened next???

Of course you already know. The Specs began to dump longs into the May17 contract expiration and price fell for next 13 consecutive days. The total decline was $2.03! Total open interest fell back to a low of 188,527 on Day 10 of this selloff and The Banks had fleeced The Specs once again.

Now let's compare this to present day by making some reasonable projections for tomorrow's updated CoT.

Last week's survey taken March 27 showed:

Large Spec Long = 60,786 Large Spec Short = 74,443 NET SHORT 13,657 contracts

Commercial Long = 82,087 Commercial Short 89,439 NET SHORT 7,352 contracts

You can already see the radical difference one year and $2 in price has made. And if last April's CoT virtually assured that the next move would be a washout of the Spec longs, why wouldn't the current CoT virtually assure that the next move would be a washout and squeeze of the Spec shorts?

But let's not stop there. Last week's CoT was a snapshot from five market days ago. Here's how things have changed since:

March 28: Price down 29¢ and OI up 8,800

March 29: Price up 2¢ and OI up 900

April 2: Price up 40¢ and OI down 900

April 3: Price down 28¢ and OI up 4,400

April 4: Price down 14¢ and OI up 8,400

Since total open interest rose on every sharp down day for price, it's very safe to conclude that the Large Specs have continued to pile into the short side of Comex silver at every opportunity. So, while last week's disaggregated CoT looked like this...

An updated CoT, based upon projected changes through yesterday (Wednesday), would look like this:

Now consider these points:

  • The situation compared to last April is the same...but it's the opposite. Just like last April, the Specs will eventually have to unwind positions ahead of the May contract going off the board. But this year, instead of dumping longs, they'll have to cover shorts!
  • If, at present, The Large Specs are NET SHORT something like 30,000 contracts, this likely places the Commercials into a NET LONG position for the first time in the recorded history of mankind.
  • So, for once, The Commercials would actually benefit from a price rally.
  • However, where sharp selloffs ALWAYS benefit the Bank desire to cap price, maybe The Banks won't allow a sharp rally for fear of igniting upside momentum. This must be considered, too.
  • But again, if outsized Spec long positions always lead to selloffs, why wouldn't this incredibly outsized Spec short position lead to a squeeze and rally?

So, we'll see what happens next. Maybe we'll need to move closer to the May18 expirations before the squeeze begins. If anything, we've been warning you for weeks that NOTHING IS GOING TO HAPPEN until The Specs begin to feel pressured by a price that rises through the 50-day, the 200-day and the key resistance level of $17. Until then, we're stuck rangebound and moving sideways.

But don't let the current malaise and price range distract you from this truly remarkable situation. Total Comex open interest is at an alltime high. The Large Specs are are building an unprecedented NET SHORT position. And The Commercials (the Banks) are now NET LONG for the first time ever.

A price rally is coming. This rally could be spectacular. The only question is whether or not The Banks will allow it to be.

IF The Banks play the usual game of swapping positions with The Specs, the mass of Spec shorts will be covered but then transferred back to The Banks. Price will rise but perhaps not more than the $2 it fell last year.

IF, however, The Banks stand down and simply hold their positions, this would force The Specs to buy and cover only amongst themselves. This limited amount of liquidity would have the potential to spike price in a rally the size and scope of which we haven't seen since the spring of 2011.

So, sit back and watch. These events will soon unfold and the record level of Large Spec shorts will begin to get squeezed. Once this begins, we'll all get to see the results in real time.

TF

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  74 Comments

· Apr 5, 2018 - 1:34pm

USDJPY now up nearly 1.5 points off of that carefully-painted double bottom of yesterday.

SteveW · Apr 5, 2018 - 1:46pm

Your reiterated message suggests a difference in the taxation of silver bullion vs. ASEs. Is that so? Also if your contractor is asking $4,000 for a job will he accept a mere $250 in ASEs and then will he report $250 in income?

BTW: In Canada we have a category of personal use property (typically computers, furniture, cars) where there is no requirement to report if the adjusted cost base or proceeds of disposition do not exceed $1,000. I've not yet paid $1,000 for a silver maple.

EDIT: On such property gains (over $1,000 cost or proceeds) are taxable but losses are not deductible. So a gain on a classic antique car cannot be offset by the loss on the clunker you regularly drive. They don't want to pick up any of your depreciation but will happily share any gains produced by inflation.

Wizdum · Apr 5, 2018 - 1:51pm

...is a major tenet of the bill of rights

-wiz

modus.tollens · Apr 5, 2018 - 2:08pm

In my short research I found that he has been writing about this for 10 years. Not exactly sure who he is but some of the dots sure seem to be connecting.

https://silverseek.com/commentary/bear-stearns-%E2%80%93-different-opini...

https://www.commoditytrademantra.com/silver-trading-news/10-year-immunit...

https://jessescrossroadscafe.blogspot.com/2008/05/ted-butler-on-price-ma...

Angry Chef · Apr 5, 2018 - 2:10pm

...Already Underway

https://russia-insider.com/en/it-war-yet-yes-many-ways-there-us-russian-...

" …Very rapidly the real action will be left to the USA and Russia. Thus any conflict will go nuclear very fast. And, for the first time in history, the USA will be hit very, very hard, not only in Europe, the Middle-East or Asia, but also on the continental US ".

Foreign lobbying might just be what destroys one's own backyard. Wasn't there something about Foreign Entanglements in the Washington's Farewell Address ?

Leaf Nation SteveW · Apr 5, 2018 - 2:13pm

When buying gold .9999 bullion it is considered a cash for cash exchange and there is no tax. There is no numismatic value to buying money with money. This goes for silver as well.

That is why I only get a receipt for Silver maples and Gold maples when I go to the LCS

Silver66 

Angry Chef · Apr 5, 2018 - 2:26pm

All bullion in Canada is subject to Capital Gains Tax. Should one occur. I have a way to reduce that tax from 25% to 10%. 

Ancient · Apr 5, 2018 - 2:36pm

since JPM is a commercial, in fact the 5000 lb. gorilla of commercials.

They have been the "big short" in comex silver for 10 years.

But now, because they bought real phyzz on the cheap, after manipulating the price down to do so, they are long something on the order of 600,000,000 ounces, according to Ted Butler, who has been all over JPM's ass for many, many years.

Yes, Turd has explained the 180 degree turnabout over the last 12 months very well.

It is the best indicator of silver bullishness I have seen since I started buying it 15 years ago.

How does it end? It appears to me that they are setting up to terminate silver futures trading as we know it today. 

Why do I say this? They are getting tighter and tighter on physical availability/supply. 

The commercials (bankers) were never going to let speculators make big-time money on paper longs as the price could theoretically go from $16 to $500 per ounce if silver phyzz dries up. So, this turn-about may be preparation for that dry-up of silver.

Time will tell. It is going to be interesting, and hopefully fun for us stackers.

kaiserwongze TF · Apr 5, 2018 - 2:48pm

since the comex close, there have been no 5 minute candles with more than 130 or so contracts traded.

totally agree that those specs who have sold have already done so.

Blythesshrink · Apr 5, 2018 - 2:48pm

https://www.express.co.uk/finance/city/941862/gold-price-reserves-Trump-...

Some positive gold press here. 1500 by year end.

canary · Apr 5, 2018 - 2:57pm

Still, he must be very surprised to see what is taking place in silver....If I recall, he always expected the price of silver to go much higher due to JPM and colluding commercials being forced to cover their short positions....Not the speculative money.

silverflower TF · Apr 5, 2018 - 2:58pm

Somehow really amazing that the paper silver price has not fallen below 16 recently. But, we'll see what happens tomorrow with the fresh BLBS numbers.

Leaf Nation Angry Chef · Apr 5, 2018 - 3:05pm

We must do things differently

I go in to a LCS with cash, or I have gone in with gold. We exchange and I walk out

no sales tax, nothing to report, a currency for currency exchange.

Silver66

think of it this way

if I ask a teller to crack a 100 dollar bill for 10, 10 dollar bills is there tax ?

I am talking about bullion and not AGEs' or Krugerrands' or collectibles

edit: Angry here is a article for a few years ago

https://www.sprottmoney.com/blog/silver-gold-and-not-paying-taxes-jeff-nielson-bullion-bulls-canada.html

each is allowed to make their own decisions as to how they manage their personal affairs, however on advantage of physical bullion is it is private and anonymous. Interpret that anyway you want wink

fluxplus · Apr 5, 2018 - 3:17pm

What number would make PM to go higher? Any thoughts?

AGXIIK · Apr 5, 2018 - 3:20pm

Or gold, begins with this conversation and question

'I can pay you with a check, cash or silver. Which you prefer?' Do you offer a discount for cash?

'My disgust with the government allows me to offer you ways of accepting income without include the government in this conversation.'

More often than not my contractors and service providers own the business, share my thoughts on taxes and either take the cash or silver/gold

As for reporting the income, I leave it to the owner to decide on that. If an AGE is has a $1 face value and that is what the owner chooses to report, then so be it.

As for the difference between selling bullion vs minted coins, my latest information tells me

Selling less than 1000 ounces of silver bullion such as generic rounds, does not garner a 1099

Selling 1000 ounces of more will generally compel the bullion dealer to issue a 1099. I've received several of those

American silver eagles and American gold eagles do not require a 1099 for any amount of metals sold. I tested that a couple of times

Non-US mint coins, Kruggers, Maples Philharmonic etc require a 1099 if you sell 25 or more I tested that with Kruggers a while back.

Check on new rules before selling large amounts of coins or bullion. You might get a check or cash. Large cash receipts can be tricky as the dealers are supposed to do a treasury cash form. None of my dealers did a treasury cash disbursement so it pays to know your dealer. Banks receiving large amounts of cash are another matter. It pays to know your banker. But $10,000 or more in cash will generally force a banker to make a report. Anyone who comes on the radar as a dealer in high 4 to low 5 figure cash amounts can get some nasty and unwarranted attention from ugly agencies, give the nature of a war on cash.

As to one's choice of reporting sales of PMs that result in a capital gain is very personal Anarchist types would likely STFU and report nothing Given the level of government surveillance, there is a very small chance of being caught in some IRS precious metals dragnet.

 It's far more likely that cryptos will be high on the IRS radar since those transactions are now visible to the gummint through their pressure against Coin Base and other dealers who were basically told to provide all data on a group of clients who moved significant dollar value of cryptos Those 14,000 or so that were caught in the dragnet when Coin Base puked up names etc, will no doubt be used to squeeze and threaten others, create a data base to profile crypto traders and then pressure other coin exchanges for the names of all clients.

 It took the IRS years to smash the Swiss Bank secrecy laws Once they got the goods on the Swiss banks the bankers rolled like bitches and gave it up

As for profitable sales of precious metals, the market is miniscule. PM trades are largely without reporting if done in a calculated manner and done without counterparty risk. If one chooses to sell appreciated PM assets without reporting the gains there is a miniscule chance of being caught. That sort of selling must be well crafted with sales between private parties and dealers spread over a number of dealers. Hiding in plain sight. I'm not saying what I will do but I also havethe luxury of some large capital losses that are carried forward. So there's no reason for me to go dark At this time.

lakedweller2 · Apr 5, 2018 - 3:23pm

What false number will they pick to "fool" the masses. They no longer can be called human. They are nothing but parasitic sublife.

Wizdum · Apr 5, 2018 - 3:40pm

for a loss..lol... but that's not the point... the LCS wouldn't buy them unless I showed my state issued ID (NJ)

two 25 cent pieces... 

lol

-wiz

Vincent James · Apr 5, 2018 - 3:42pm

From the last report the Small Specs were 21009 long and the Commercials and Large Specs short 21009.

Shallow pockets long, deep pockets short, so it would be easiest for the big players to squeeze the small specs out of their longs, with a push down, with this set up.

Just saying.

Markedtofuture · Apr 5, 2018 - 3:57pm
Bitcoin is a Bargain (steal) at $6550
Ancient canary · Apr 5, 2018 - 4:26pm

Yes, I agree. Ted thought silver prices would skyrocket due to the big short's (read: JPM) having to cover at ever higher prices as phyzz dried up.

What he forgot to include in his calculations, apparently, was that JPM knows more about physical silver stocks than he did.

And, Ted always thought, and later, hoped that the regulators would straighten it all out, and put JPM in the corner for a time-out.

It took a long time for him to realize the CFTC=FED=JPM=U.S. Treasury=BIS.

JPM knew, apparently, when to start using the low prices it created to buy up real silver on the cheap. So, here we are, with the tables completely turned.

JPM can now profit, if it wants to, from its vast physical silver stockpile.

Angry Chef · Apr 5, 2018 - 4:29pm

Silver66,

If you go to your LCS and exchange a small amount of AG/AC .9999 bullion. As long as it's less than $10,000.00. Your dealer is not violating the Law by CRA standards. As soon as more than $10,000.00 is exchanged, your identification needs to be recorded. Your LCS is not required to submit the information to CRA ( Canada Revenue Agency ) but he is required to have it on file if asked. If he does not and they manage to catch the offense. The dealer is subject to a $250,000.00 fine and 2 years in prison.

Ain't freedom and Democracy great comrade !!!

Angry Chef · Apr 5, 2018 - 4:32pm

...In Reserves

https://www.zerohedge.com/news/2018-04-04/bahrain-discovers-largest-oil-...

Now I've never been to Bahrain but I'm pretty sure there are a bunch of crazy terrorists their and they need a good dose of Democracy.

canary · Apr 5, 2018 - 4:36pm

With one exception. The equation CFTC=FED=JPM=U.S. Treasury=BIS.....is little longer, ECB=BOJ=GS=SEC=FT=WSJ=........

modus.tollens · Apr 5, 2018 - 6:30pm

To piggyback on Turd's post.....I reviewed all of my Silver COT reports dating back to 1/15/1986 to see if/when was the last time Commercials were "Net Long". To my surprise, I found that Commercials in Silver have NEVER been "Net Long".

I found it surprising because when I looked at my Gold COT reports for the same period, I found that there have been MANY instances in which Commercials were "Net Long" the last one being 5/8/2001 when price of gold was $265.

Also worth noting is that Silver Spec Net Short position as of the last COT was 10.1% of Spec total contracts held. This is the highest % since 7/29/1997 when the Silver Spec Net Short position was 21.4% of Spec total contracts held. (19,062 Long & 29,441 Short). Price of silver then was $4.35.

I guess my point is that their game could continue little longer. But given where we are today from the COT perspective of last 32 years we should not be selling now and playing into their hands. Sure, it's very frustrating but these scumbags know that weak will sell when pressed. Thankfully, thanks to our leader, we have each other. There are many countries out there whose people depend on silver mining to feed their families. In the name of Democracy the World Bank has given these countries loans with high interest rates to keep their mines open in hopes of taking over the mines when countries default on their loan payments. Unfortunately, only when the World Bank and its partners get enough of these mines in their own name will the price begin to move. Like it or not, that's the world we live in today.

Mike · Apr 5, 2018 - 7:25pm

I expect a slam down tomorrow AM after the best BS jobs report ever. But what do my eyes behold - gold up $4 and US dollar down at 7:15 PM. 

Ryutaro Sakurai · Apr 5, 2018 - 7:46pm

My assumption:

Specs and Commercials are the same entity have two faces. In short, both of them are banks controlling silver market. So it's no use to analyze COT report which banks make up every time. But there is the possibility that they have changed their strategy to make money along with ascending price move. Why? Because there is serious physical shortage due to some sovereign size entity amassing physical silver utilizing the low price situation. Banks have been already aware of the market shift and changed their strategy.

· Apr 5, 2018 - 10:47pm

UP again! Another 2,250 contracts to another ALLTIME HIGH of 243,385 representing 1,216,925,000 ounces of digital "silver".

· Apr 5, 2018 - 10:54pm

Not that it means anything at all, but I've always wondered if the time would come where Comex Gold OI falls under 2X Comex silver OI.

Forever this has been 3X and even 4X. For example, back in the day total gold OI might have been 500,000 while silver was 150,000. That's 3.3X.

In 2016, when the alltime high for Comex gold OI was set at 657,776 contracts, the total silver OI was 213,146. That's 3.08X.

Last year when Comex silver hit its previous alltime high of 234,787 contracts, total gold OI was 474,018. That's a low of 2.02X.

But I've never seen it be less than 2X. Off of today's preliminary numbers, it's 2.03X.

Notice: If you do not see your new comment immediately, do not be alarmed. We are currently refreshing new comments approximately every 2 minutes to better manage performance while working on other issues. Thank you for your patience.

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Key Economic Events week of 6/11:
6/12 Trump-Kim summit
6/12 8:30 ET CPI
6/13 8:30 ET PPI
6/13 2:00 ET June Fedlines
6/13 2:30 ET CGP presser
6/14 8:00 ET Count Draghi presser
6/14 8:30 ET Retail Sales
6/14 10:00 ET Busi.Inv.
6/15 9:15 ET Ind. Prod

Key Economic Events week of 6/4:
6/4 10:00 ET Factory Orders
6/5 9:45 ET PMI Svcs
6/5 10:00 ET ISM Svcs
6/6 8:30 ET Intl Trade and Productivity
6/8 10:00 ET Wholesale Trade

Key Economic Events week of 5/28:
5/30 8:30 ET Q2 GDP 2nd guess
5/31 8:30 ET Personal Income
5/31 9:45 ET Chicago PMI
5/31 10:00 ET Pending Home Sales
6/1 8:30 ET BLSBS
6/1 9:45 ET PMI Manu Index
6/1 10:00 ET ISM Manu Index
6/1 10:00 ET Const Spend

Key Economic Events week of 5/21:
5/22 10:00 ET Richmond Fed
5/23 9:45 ET PMI Composite
5/23 10:00 ET New Home Sales
5/23 2:00 ET May FOMC minutes
5/24 10:00 ET Existing Home Sales
5/25 8:30 ET Durable Goods
5/25 9:20 ET Chief Goon Powell speech

Key Economic Events week of 5/14:
5/15 8:30 ET Retail Sales and Empire State Fed
5/15 10:00 ET Business Inv.
5/16 8:30 ET Housing Starts
5/16 9:15 ET Industrial Production
5/17 8:30 ET Philly Fed

Key Economic Events week of 5/7:
5/9 8:30 ET PPI
5/9 10:00 ET Wholesale Trade
5/10 8:30 ET CPI
5/11 8:30 ET Import/Export Prices

Key Economic Events week of 4/30:
4/30 9:45 ET Chicago PMI
4/30 10:00 ET Pend Home Sales
5/1 9:45 ET PMI and ISM Mau Idx.
5/1 10:00 ET Const. Spending
5/2 2:00 ET FOMC fedlines
5/3 9:45 ET PMI/ISM Svcs.
5/3 10:00 ET Factory Orders
5/4 8:30 ET BLSBS

Key Economic Events week of 4/16:
4/16 8:30 ET Retail Sales, One Fed Goon speech
4/16 10:00 ET Business Invt.
4/17 9:15 ET Industrial Prod., Four Goon speeches
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4/20 Two Goon speeches

Key Economic Events week of 4/9:
4/10 8:30 ET PPI
4/10 10:00 ET Wholesale Trade
4/11 8:30 ET CPI
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4/13 Fed Goon Speeches...Rosengren 7:30 ET, Bullard 9:00 ET, Kaplan 1:00 ET

Key Economic Events week of 4/2:
4/2 9:45 ET PMI Mfg Idx
4/2 10:00 ET ISM Mfg Idx and Construction Spending
4/4 9:45 ET PMI Svcs Idx
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4/5 8:30 ET Intl Trade
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