If you have been wondering why silver prices haven’t soared in spite of the supply and demand squeeze on the market, look no further…
For months we have been talking about how the white metal has been significantly undervalued in comparison to its gold counterpart. The continual low prices have been nonsensical with the uptick in the use of silver in green energy, cell phone components and other manufacturing uses, coupled with its position as a precious metal and portfolio hedge.
However, this past week the Commitment of Traders report (COT) shed new light on the silver scenario. In the report, the focused short position in Comex silver futures came directly into the spotlight. In the reporting week that ended last Tuesday, the four largest shorts in Comex silver reinforced their position by adding more new shorts than in any other week in the past several years. These four investors added an astonishing total of 6,672 new shorts, the equivalent of 33.4 million ounces. In fact, these four major investors hold a short position of roughly 312 million ounces according to the COT report. When combined with the next four largest traders the short position in silver totals nearly 404 million ounces.
If you’re looking for a viable answer as to why silver capped out at $30/oz and declined even with significant pressure on supply and demand and visible physical shortages in the retail market, look no further. The price capping seen was caused by significant short selling on the COMEX and manipulation of silver sales in the silver ETFs.
Essentially, if silver prices were allowed to reach their full potential, the losses will be astronomical for the four main investors holding the short position. For every 8 dollars silver gains, it equates to roughly a $3 billion dollar loss for the those heavily invested in short positions. These four main investors are like people who have maxed out their credit cards and continue to spend wildly in an effort to remain solvent. By significantly increasing their short positions they are forcing silver prices to remain low, in spite of the fact that we have seen the highest trading volume in history on the COMEX and in SLV. These shorts were so effective that in spite of volume, the white metal gained only a dollar.
From Thursday, January 28th through Monday, Feb 1 the total trading volume in shares of SLV soared to the highest three-day level in history. There were more than 545 million shares traded. In spite of this record trading volume, silver was up only $1 at the close of the day Tuesday.
Like those who have maxed out their credit cards, there comes a day when the lender comes to collect. The manipulation in the silver market can only continue for so long before the sheer squeeze on silver demand busts open the ceiling on silver prices and allows the white metal to take its position as a serious contender on the market.
Because silver prices are still so incredibly low, now is the time to get in on this incredible investment opportunity and wealth protection, while you are still able to do so. With silver supplies already dwindling, there will come a time when it will be nearly impossible to get your hands-on physical silver. Take advantage of the opportunity today while the investment window remains open.
Remember this – physical silver has decoupled away from the spot price and is allowed to trade freely. That is why we are starting to see physical prices well above the spot price. You cannot make any more pre-1933 coins, therefore it cannot be manipulated. Bearing in mind, this last week SLV changed its prospectus allowing less real silver to be held in their vaults for their outstanding shares. You cannot change the prospectus on pre-1933 coins.