By Ted Butler

No matter how convinced I may be that silver has been manipulated downward in price by JPMorgan’s concentrated and rapidly increasing short position in COMEX futures contracts; it is vital to explore why that may be wrong. Particularly with a conviction held for a long period of time, it is important to make sure I am not missing anything basic. The best way to do that is to listen closely to those who may disagree with the silver manipulation allegations. However, uncovering the arguments against a silver manipulation is not as easy as you might think.

For one thing, there is certainly no strong case against manipulation being made by those that should be denying it forcefully, namely, JPMorgan and the regulators at the CFTC and the CME Group. Aside from a brief TV appearance in April which tried (unsuccessfully) to dismiss the matter, JPMorgan has been uncharacteristically mute on an allegation that is serious beyond description. That’s why I wrote to JPM’s board of directors recently. The CFTC has certainly denied that a silver manipulation existed on multiple occasions in the past, including public explanations in May of both 2004 and 2008; but since the evidence of a short side concentration by JPMorgan was revealed in August 2008, the Commission has been investigating silver again. The way I see it, that’s less of an argument against a silver manipulation and more that the agency is investigating silver because JPM’s concentration may be manipulative to the price. However, like JPMorgan, the Commission has been silent on the specific allegations of manipulation via JPM’s concentrated position. The CME, true to its recent tradition, is only concerned with increasing trading revenues and can’t be bothered to address allegations of the most serious market crime possible being in progress.

The bottom line is that after 4 years, no real response has been offered by those who should have responded. There is a good reason why there has been no response by JPM, the CFTC and the CME to persistent allegations of a silver manipulation; because to respond risks expanding the discussion further. If they say anything, it risks truly opening up a legitimate debate. That’s because they (JPM, CFTC, and CME) know there is no legitimate explanation possible. So blatant is the short concentration by JPMorgan that any attempt to legitimately explain it away would invite additional scrutiny. By remaining silent, all three entities, effectively, muffle debate. There is no excuse possible that would permit JPMorgan to hold 31% of the entire net COMEX silver market (minus spreads) or for the four largest shorts to hold 49% of COMEX silver (as of the most recent COT). Just to give you a sense of the lopsided nature of big shorts compared to big longs, on the same methodology (no spreads) the 4 biggest longs hold only 13.4% of the COMEX silver market. JPMorgan, alone, holds a position more than 2.3 times larger than the 4 biggest longs combined. That’s obscenely manipulative. Plus, JPMorgan has been virtually the only active short seller in COMEX silver for months.

JPM, the CFTC and the CME Group have been silent on the matter because all know that the massive concentration on the short side of COMEX silver cannot be defended openly. While all three understand that the issue is concentration, this issue is still not widely understood. Therefore, the void left by the official silence has been filled by others who do not appreciate the significance of JPMorgan’s concentrated short position. What’s being said by others that argue against the existence of the silver manipulation? Some actually sound reasonable at first, but when you dig into the arguments, they just don’t hold up. Most center on JPMorgan holding physical silver or hedging for customers, as a reason to explain the outsized short position on the COMEX. Another version holds that JPM is holding offsetting positions in the OTC market, which is said to be much larger than the COMEX. As I said, all sound reasonable at first; until you apply some common sense.

Interestingly, none of the arguments defending JPMorgan’s concentrated COMEX short position denies that the position exists; the arguments attempt to excuse or legitimize the position. It does raise the question – why would JPMorgan need semi-anonymous outsiders to defend the bank? JPMorgan is perhaps the most influential and well-funded US bank, commanding an army of legal and public relations talent capable of putting a favorable spin on any claim that the bank was doing something wrong. Yet the bank has been silent (save for the lone TV appearance) for 4 years. To the claim that JPMorgan holds the physical silver backing up its massive concentrated short position, why didn’t the head of commodities for JPM say that was the case in the April TV spot? Instead she said it was for customer positions. Which is it? JPMorgan has sold roughly 80 million ounces of paper contracts short on the COMEX over the past 2 months, increasing their total silver short position to nearly 150 million oz. Does this mean they bought 80 million physical ounces in the past two months or that they had the 150 million physical oz all along?

None of this makes much sense, as who would buy or hold such a giant physical position and super aggressively short it in a concentrated manner? To accept that JPMorgan is selling short paper contracts aggressively in order to buy physical cheaply is to accept that they are manipulating prices; that’s a motive for criminality, not an excuse. Even the alternative that JPMorgan is only interested in hedging a big silver position is preposterous. 150 million ounces is more silver than the Hunts or Warren Buffet ever held and we are to believe JPMorgan amassed that position secretly? Did JPM get it from Bear Stearns? You have to use some common sense here – if JPMorgan ever did hold 150 million oz of silver, I would bet they would drive the price to $500, not short it aggressively.

In reality, even if JPMorgan did hold all that real silver (I don’t believe that for an instant) it would make no difference in terms of manipulation and concentration. There is no legitimate economic motive to holding such a large physical long position and paper short position simultaneously indefinitely, other than as a means to control the price, which is hardly legitimate. JPMorgan has been the dominant short in COMEX silver for 4 years. If JPMorgan were only interested in “hedging” a big long physical position, that would be a one-time transaction for a non-producer; they wouldn’t be actively reducing and increasing their paper short position. Regulators would never permit Exxon or Saudi Arabia to hold a concentrated position that comprised 31% of the entire oil futures market, no matter what cockeyed excuse was offered. If any US bank held 31% of the corn or wheat futures market, heads would roll the day it became known. It is the outsized concentration that is the issue, not the invented excuses.

Another excuse, in which JPMorgan is only hedging for clients, also doesn’t hold up when examined. (This is the excuse offered on TV by JPM). Is JPMorgan the only broker in the world hedging for clients? Of course not, yet JPM has been the only COMEX silver short seller over the past month. Positions for large traders are calculated by the CFTC in terms of who controls the trading in that account. This allows for the possibility that JPMorgan has arranged for a series of fake hedging accounts that it can say are behind the giant short position. But JPMorgan is reporting to the CFTC correctly that it is in control of the accounts; otherwise the positions wouldn’t be in JPM’s name and control. That’s what matters – JPM’s control. Commodity law would never allow the flimsy excuse of hedging to permit concentration and manipulation.

A version of the hedging excuse sometimes offered is in regards to market-making and that JPMorgan is only selling more silver short to serve as a counter party to speculative buying. Without JPMorgan’s additional short sales, the reasoning goes, silver prices would shoot up dramatically. Hello? This is what I’m saying, namely, that without JPMorgan in the picture, the price of silver would be dramatically higher. The commodity futures market is an open auction market; not a specialist market like the New York Stock Exchange used to be. That means that the price of silver and other commodities is to be determined by the open meeting of legitimate buyers and seller, speculators and hedgers alike, and not by means of a dominant trader who smoothes out and controls the price. Nobody decreed that JPMorgan was to be the controller of the silver price and these market-making excuses are nonsense.

A final excuse for JPM’s grotesquely large concentrated COMEX short position is that it only represents a small part of JPMorgan’s total position when compared to the much bigger OTC market. In other words, JPM’s COMEX short position is offset by (presumably long) OTC positions, netting out and neutralizing the COMEX short. The OTC market may be bigger in many things, but in silver, the COMEX is the big dog. COMEX silver is the fountainhead for world silver prices and the move to near 24 hour Globex trading only strengthens the COMEX’s dominance. Some common sense is again in order.

JPMorgan has suffered very negative publicity for the past four years as a result of its big COMEX silver short position (including being sued civilly for manipulating silver); something the bank should be interested in ending. If the OTC market were so much larger than the COMEX, it would have been very easy for JPM to close out the COMEX short and confine its dealings to the (supposedly) much larger OTC market. Had they converted to the OTC market, no one would have been able to pinpoint JPM’s concentrated short position and there would be no negative publicity. Yet for more than 4 years, JPMorgan has remained with its COMEX short position and has had to endure the negative publicity so hated by financial institutions. The reason is simple – the COMEX is the big dog and JPM can’t transfer the position to the OTC market and is stuck with the position and the negative publicity that entails.

I admit that the silence of JPMorgan, the CFTC and the CME regarding JPM’s concentrated short position has naturally raised questions asking for an explanation. But that doesn’t mean we should accept any excuse as an explanation, particularly if the explanation doesn’t hold up when examined. There has not been a legitimate explanation for JPMorgan’s massive concentrated short position to date and I doubt there ever will be. I do expect that JPM, the CFTC and the CME will throw out something eventually and it is at that point that the legitimate discussion will begin. We are not at that point yet.

Ted Butler

October 1, 2012

This was an excerpt from an article sent to subscribers on September 26. For subscription info please go to

  1. Hi, thanks for you guys patience with my ignorance of the manipulation however I am gathering the info to convince myself to the fraud and educate myself in the identification of it. The above aticle helps however I have another query about the verification of the claim that it’s JPM dumping the paper silver – Is this information gathered from the COT report ? if not can someone direct me please.
    I understand the mechanics of it I just need to identify the trail so I can observe it with my own eyes.

  2. In Jack Schwagere’s book Market Wizards page 163, trading legend Ed Seykota talks about how the silver market got the better of him, how he got totally spooked out by price spikes and bear raids. The book was first published in 1989, so Seykota’s silver nightmares must have been even before that date. But, based on 1989, silver hi jinks appear to have been going on for the last 23 years at least. Imagine the institutional knowlege of long time insider silver traders when it comes to manipulation – no wonder they regularly wipe their backsides with us amateurs.

    • Andyz, That is precisely my point. Ted Butler, Jim Sinclair, Biz Weir, David Morgan, and now Jason Hommel, brotherjohnf, Andy Hoffman, and Greg Mannarino. It seems the list of new SILVER BOOM BELIEVERS every few years gets longer with new faces and OLD ideas. Is silver manipulated? Probably. How much? No one knows PERIOD! Will it ever end? When and if the end comes, maybe. But I am not staking my future on what these guys say. They are all _________________! You fill in the blank

  3. You know the great thing about silver is that you can take it out of the market whenever you wish and hold it in your hand.  The more phyzz that is stacked decreases the amount of leverage that the paper market holds.  I’ve tried holding it next to a cig lighter and nothing happens.  If my bank’s computer fails the funny thing is that my silver is still there.  Heck if my favorite chair breaks I can even sit on it.  Just wanted to share value with my common man.  Later!

    • I’ve realized that the ‘buy silver, kill the beast’ mantra is a bunch of bull.  When JPM can in 2 days dump paper silver that amounts to 2.5x the annual US production of physical there ain’t no leverage involved.  They can buy, sell, trade as many paper units, long or short, as they want without regard to whether there is so much as a single ASE to back it up.

      Stack for yourself. The game will end when it ends.

  4. “Just wanted to share value with my common man.”

    Common man?  Everyone here is highly UN-common, IMHO.  It is the common man / woman who is satisfied with the fiat paper Ponzi scheme.  😉

  5. Silver is a harsh investment that can test anyone’s patience.  It’s not for the faint of heart.  Fortunately there are enough stalwarts in our community to give us courage.  Let’s say we have the patience to stay the course for 10 years. That comes and goes pretty quickly. If silver does nothing more than stay ahead of inflation at 5. 10 or even 15%, our stash of wealth grows fast enough to preserve its value. All else is chatter and static.
      You can spend silver.  Chatter is a worthless as paper money   This is not to take away from the people who talk about silver. But talks cheap. Silver’s cheap too but for long

    • I think that silver is cheap right now because it’s all thanks to the Hunt Brothers that drove the price of silver too high which caused mines to produce too much silver. Then after silver’s price fell, these extra silver were just enough to supply the world. Now, these supplies are almost and JP Morgan is the one that is manipulating silver’s price today with paper silver. Silver should be at least 50$ per ounce today.

  6. ‘uncommon’  I like that term.  It beats the heck out of ‘crazy as a sh** house rat’  I think I’ll try uncommon  the next time someone tells me I’m nuts for going ‘all in’ on silver. LOL

  7. i hear that silver is manipulated … im sure that that is true… the price of silver is going up …. the cost of digging up silver is going up, silver cannot fall below $20 or supply would start to die… in ten years time those costs will continue to rise … whatever the machinations behind the scene silver will continue to rise… i love these stories of $500 $1000 an ounce plus but i bought my silver at an average price $26 over the past 3 years average price of silver this year will be in the region $30 + if it rises back to $40 my returns are great very few investments in the last 3 years would match it. there is no losing in this but if prices sky rocket there is enormous potential gain. if the market is manipulated im still doing ok but if it is these things usually have a way of ending and at that stage i get a bonus…. if i was leveraged i might worry about the manipulation to cover my options but when you own physical the day to day bullshit of a crash here and a crash there dont change your position to much … i wake up count my ounces and confirm that all 5400 smile back at me and then roll over and go back to sleep …. its not a big stash but its my stash …. and its not going to disappear as in mf global its not rehypothecated and owned by 46 other investors and it only really has value on the day i sell it … which i assure you will be for a lot more than $26 an ounce … so jpm can play there game … my advice is buy under 30 and sell whenever YOU want …

    • Now, it actually cost about 29$ per ounce to dig silver for the miners. My advice is that I think that people should be thinking about how many ounces of silver they own and not how much did they paid for each of them. They should never sell their silvers unless they really need to pay for something such as the electric bill because dollars are unities made out of nothing while silver took some labor to dig it, has a limited supply and has a lot of uses.

  8. The reason why CFTC doesn’t respond against the silver’s price manipulation by JP Morgan is because CFTC is actually an organization that only helps the big and rich corporations. If they really do care about the people, then they would’ve shut down the manipulation right now. Unless if CFTC doesn’t want the price of silver to go too high or else, it will cause panic to people and then they will rush to buy some silver which will devalue the dollar. Maybe even CFTC and JP Morgan is actually helping by stacking some physical silver very cheaply so that we, the smart ones, could prepare against the dollar collapse.

Leave a Reply