I have written several times regarding the size of COMEX futures going into delivery periods. It is time to do this again with silver. The September delivery month has 65,000 contracts still open. This represents 325 million ounces of silver. The “registered” category at COMEX now has just over 60 million ounces available for deliver. If you tally up the entire inventory, this is roughly 175 million ounces.
As we have seen plentiful times in the past, the futures normally get rolled into the next active month and we merrily go on down the road. In fact, over the past year we have seen large amounts of gold and silver contracts initially stand for delivery only to see them either rolled at the END of the delivery period or “settled” with little or no movement in the inventory statistics. Both of these situations have had speculations by us conspiracy nuts that they are being either “cash settled” or cash settled with a “premium” attached to entice the contract owner. Is this true? I obviously do not have any proof that premiums are being paid but it is a logical explanation and the lack of inventory movement is supportive of the theory.
I would ask the question, “Is a COMEX default plausible?” Judging by the current numbers standing for September silver, the inventory available to satisfy delivery is oversubscribed by more than 5 times. Yes I understand, we have watched over the last year or two this very same scenario play out. Heavy open interest going into delivery and “poof,” they then just disappear. I would also ask if the past heavy open interest may have been “dry runs” at busting COMEX open like a watermelon. Maybe the huge open interest is a form of “collateral”? Let me explain with a possible twist.
As you may remember, I have put forward the thesis that the Chinese (and thus the Russians) have been and are behind the heavy open interest in silver which has been building and building. I believe the Chinese have “spread” their holdings around through various proxies in order to be “discreet” with what they are doing. Logically, who else has deep enough pockets to have withstood the price of silver going from $40 to $20? The open interest has been stubbornly high throughout the last 2 years and without any great “flushes” of open interest as one would expect with the huge and frequent downdrafts. Obviously the “sellers” have also had deep enough pockets to beat back the buying pressure created at and below the cost of production. To me, “Chinese proxies” in silver make as much sense to me as “U.S. Fed/Treasury proxies” do in Belgium, I think it just makes common sense.
I would like to further my thoughts on this theory. Why, (if I am correct and China “is” the huge open interest in silver) would China sit back and absorb billions of $ in losses? Does this make any sense at all? Don’t investors “invest” to make money? Very crudely, 150,000 contracts (750 million ounces) taking a $20 loss is $15 billion, this is HUGE right? Wrong, in the scheme of things as I see them, this is merely the cost of doing business and less costly than a ham sandwich (unless you are really hungry). Remember, China has amassed over $3 trillion of U.S. Treasuries so $15 billion represents one half of one percent. In perspective this is very cheap “insurance,” I’ll explain in a moment.
OK, so here is the rest of my theory. I believe the Chinese have been “using” their positions on the COMEX. This can be looked at from several angles but they all amount to the same thing. Maybe the Chinese have these positions as a “detonation switch”? Maybe they are holding COMEX futures so they are able to at any time and for any reason, blow up the game? Maybe the position is “leverage” or a gun to the head of the U.S. to continue delivering gold …or else? It is even possible that China is using this position as a “lien” on the silver inventory so it can’t get away from them? I believe China leased silver out to the U.S. in the 1990’s, maybe this is merely a way to “attach” some or all of it?
Whether my theory is correct or not remains to be seen, the important thing to understand is how small the silver market really is… and how important it is to retaining the “trust” element in the Western financial system. The 60 million ounces of “deliverable” silver at current prices are only worth $3 billion. Ask yourself what would happen if (when) they run out and cannot deliver more? Ask yourself, when COMEX fails to deliver silver then what will your thought process be? You will probably want “some” if you have none or MORE if you already do, right? Will your thought process go further? “Further” as in the gold market? “Further” as in platinum, zinc, copper, wheat, rice, cotton, orange juice, milk, coal or any other market where “paper” represents “real stuff.” Basically, if not enough silver existed behind the contracts then what other markets might this same condition apply?
Do you see where this can lead to? If I am correct and China is in fact the outsized and unusual open interest in silver, they are sitting on a detonation switch to the entire financial system of the West. Actually, rather than call it a detonation switch, the better term would be “kill switch” because this is exactly what would result.
I am sure there will be many who either don’t believe this theory or even tell me I’m nuts. If I were China, THIS is exactly what I would do! Follow this reasoning through if you will, China has already shown “trust” in the U.S. as evidenced by their U.S. Treasury holdings. They “trusted” us by lending capital to us and in return expecting to receive payment in the future. “Payment” is not and will never be in question because we can simply create the dollars to pay. What is in question is what those dollars will be worth on the international markets when they are paid? You see, for very little money, expense or even effort, China can “force” the U.S. into a “bankruptcy” using this tiny silver position.
To wrap this up, laugh if you will but I don’t think you should. Think this theory through several times before you fire mud ball comments back to me. It really is simple and not complicated at all. In fact, it makes as much common sense as a bank, a pawn broker or even a private lender moving to “secure” their loan(s). I believe China is merely acting in their own best interests because after 2008 they have watched us willfully bankrupt ourselves and grossly devalue the dollar. They have imported massive tonnages of gold since then, why not hold an “insurance policy” in silver which can be “claimed” whenever you choose? What lender wouldn’t act in this manner?
Bill, the CONeX, as I call it, is pure fraud. But nobody will be able and corner it presently IMHO, they can (and will) settle you in cash instead, NOT metal, when demanded in size (and they clearly say so). It’s a farce that may last longer than we all like, but fail it will. Is it’s failure near? I have no clue, and as long as the CEOs of mining industries are bought into their game, it may hold up still a bit. On the bright size, if one – like China, for instance – understands all this, this is like an early extra super sale before X-mas season. We should all embrace it and sing “Hallelujah, thanks for the bargain, banksters”.
yes, it is a subsidy.
Bill you could be right. China has however, benefitted greatly over the last 20 years from their relationship with the U.S. Tho they own 3 trillion soon(say maybe 18 mo.)to be greatly Devalued treasury debt, look at the industrial, commercial relationship with us that they have benefitted from. The U.S. is primarily responsible for building them into economic world power they now are. Also, china has been very busy over the last 6 years converting these excess treasuries into tangible assets all over the world thru their purchases of real assets in Africa, Asia, N. America and S. America not to mention all the gold and silver purchases along with trade agreements, etc. So, they have a symbiotic financial relationship with the Fed that has benefited the suppression of assets for mutual benefit and all the while China continues to make major world wide purchases with these treasuries many/most of which we may nothing about. I do believe there is an evil working relationship between the PBC and the Fed. I of course could be wrong.
I believe you are correct but ask yourself this one question, what are we worth to them once the delivery of gold ceases?
very nice article, you have been stressing a sense of urgency of late and i can see this connection. ALL markets operate just like the fractional reserve banking system itself. silver and gold futures markets are also very fractional as is EVERYTHING including the “deposit” in your bank. look at how over leveraged everything is from gold and silver futures to bank loans to the Federal Reserve itself. it will take one small straw to break the camels back and when it does there will be a “bank run” on EVERYTHING: food (2 days supply available in stores), gold/silver markets 100:1 or more, Fed balance sheet 70x leveraged, etc and etc. A paradigm shift on everything is about to take place and you will either have it or not when that time comes (as you noted in your earlier notes on waking up to silver and gold doubling or more).
WOW Jeremy! This sounds like I wrote it!
ps Brother JohnF on youtube referenced this article on his new video posted today. good stuff!
Just a thought: how do we know the open interest is so high? Since they lie about everything else including the COT report couldn’t they be lying about OI as well, or is that too much to cover up? Maybe it’s another head fake like when they took it to $49 to get everyone proclaiming this is the end, then slammed it down for 3 years.
The Chinese have to know the math! They must know we’re at the bottom of the barrel when it comes to deliverable gold! I wish we could know how much above ground there truly is.. Some say tremendous amounts (Karen Hudson)some say vaults already empty hmmmm.. I think we’re close ie Germany getting screwed + all the geopolitical tension. Banksters need a big event/chaos to cover this mess. Please wake up sheeple.
Karen Hudes says there are 170,000 tons of gold sitting in Hawaii. Subterfuge.
What are the chances of that? Is this lady taking crazy pills? Dis-info agent? Who owns it?
you can look her up or even go to my article “Yamashita’s gold” and view the comments. She bombarded me with e-mails, I have recently heard she is still employed by the World Bank? or whatever bank she said she was fired from. She did an interview with Greg Hunter and others on You Tube, watch her and then decide if you think she has one ounce (pun intended) of credibility.
Yes I’ve viewed the Greg Hunter interview with her, thought she was a bit nutty probably full of it. But, I often listen to Jim Willie find him to be pretty spot on. He’s mentioned several times that through his “London” source who’s involved with bullion banks that they’ve been sending 1000 tons a month (ridiculous amount) east every month for something like 18+mo and that it hasn’t stopped huh!? Yashimata’s stash perhaps?
perhaps but 1,000 tons per month is far too much in my opinion.
Bill, Hope you’re wrong. Could it be something as simple as the manipulators of PMs offloading positions needed for earlier Shorting of PMs?
If you’re going to manipulate a market, then you can buy let’s say silver futures 2 months away at say $20, manipulate the market up to $25. Then manipulate it down to $18. Somewhere along the way you take a profit, then you need to dump whatever longs you got left. Because if you manipulate the market, you KNOW what the price will be on any given day.
I don’t think it the cartel who is long, they “dump” futures by the gazillions which would make them short, “someone” (I believe possibly the Chinese) has to take the other side and be long.
All sounds fine to me in theory.
Could not the terrible chinese simply dump their holdings of Bonds as a kill switch?
yes but they would then be shooting themselves without any gain, the silver market is 1.000’s (plural) smaller than the Treasury market. Besides, the Fed could just buy the bonds, they can’t deliver metal that does not exist.
Bill, Your synopsis IS the most logical one, and Jim Willie agrees with it, as do I, a Hat Trick Letter and Miles Franklin subscriber for several years. I have believed in your reasoning for years now, and for China to be sitting on the “kill switch” is NOT shooting itself in the foot (as one commentor here put it), it is a cannon aimed directly at the Western Bankers’ hearts!! China WILL pull the plug when they’ve accumulated all the physical gold & silver inventory in the Comex, and I believe that moment is coming before the end of 2014! October has always been the stock market crash month, and I believe will be again, and along with it, snap the suppression rubber-band.
Bill: your thesis has merit, but if the Chinese pulled the switch it would immediately expose the scam and the whole global economic Ponzi would implode. I really don’t think the Chinese are ready to do this until they (or Russia)are threatened with an actual war which the psychos in DC are really trying to foment. In the end, IMHO, it depends on whether or not the Rothschild cabal has corrupted Chinese politicians and society as they have every other one in the Group of 20. I can only hope that this is not the case; otherwise we, and our descendents, are all screwed.
maybe this is why we haven’t had a hot war yet? Because the Chinese will implode the financial system?
Hot war IS on the back burner and will more than likely involve proxies, such as Iran, Saudi Arabia, Iraq, Ukraine, and Syria. It WILL be East vs. West but it will not be USA / UK vs. China / Russia directly. I’m not a huge fan of Jim Rickards but his comment about “first there are currency wars, then trade wars, and finally shooting wars”, is spot on, IMO. The recent tiff between the US and Russia over Ukraine and the sanctions that followed are but the inflection point between currency war and trade war. We ARE progressing towards hot war as we speak.
we have been in currency wars since 1971, trade wars on and off since the late 80’s early 90’s… now the dance toward a hot war via some sort of false flag made up aggression/retribution. For the most part, the people of the world are not in favor of it, Switzerland is the last Republic where “the people” still have a say.
Blah, blah, blah.
Where do you get this muck and mire you call commentary?
Its bullshit and you are part of the bullshit network.
When Rothschild says jump, you will and that includes prices.
you are not forced to read it. Besides, did you “over pay” for reading my opinion?
Mr Holter believes as do plenty of other commentators, that there are shortages of silver and gold and that prices are manipulated.
If there was any real lack of supply then the prices would be higher in the spot market than they are in the futures market going out a year.
That ain’t happening,currently.
In saying that I think gold and to a much lesser degree silver, should be part of people’s assets.
Yes, gold and silver are an asset class that is largely ignored by the MSM and the financial press. I don’t think that this is an accident. Had a stock done what silver did from 2001-2011, there would have been dancing on Wall & Broad Streets. But it went largely unmentioned except in the alternative media.
As to gold and silver, they are a number of things but I do not see them as “investments”. I see them as MONEY, as an inflation hedge, as financial insurance against a possible financial collapse or currency devaluation, and as a long-term savings plan.
Holding US dollars over the long term is a great way to lose the battle with inflation. Holding gold and silver for the long term is a great way to win the inflation battle.
Seen as money, buying PMs is not spending money, any more than exchanging two $10 bills for a $20 bill is spending money. It is merely an exchange of one kind of money for another.
Exactly, and MSM considers gold and silver “scary scary”!
Gold is money.
A good thing to own.
Bill, your theory makes a lot of sense to me. There has to be a reason why the Chinese not only do not foreclose on us but actually come back for more. Collateral is the only thing that makes sense. Be it in the form of our real estate or in what you suggest in this article, the Chinese are NOT stupid and they ARE securing the debt somehow.
This is my first response but I read all of your commentary. I have yet to read anything you’ve printed that isn’t logical.
thanks Lenn and welcome to our comments section. I believe you are correct about real estate, probably through mortgage securities, silver is just another avenue and one they could expose overnight in my opinion.
Bill..I like your ccomments and your reasoning…It would really be great to know who is the BIG ONE that are playing the Silver Market in the background…
If it is the Chinese and the Russians…I believe they will go all the way…
at the time of their choosing
“I have yet to read anything you’ve printed that isn’t logical.”
I agree but Holter’s comments are also reasonable and accurate, IMO. These are things that I very much appreciate because it is virtually impossible to find them in either the MSM or the financial media.
you sir, could be right
it doesn’t defy logic.
Bill, you continue to anticipate an event that may never happen. Yes, Silver, like many commodities is managed. I suspect it will always be that way. They have ceased to become supply/demand – and this is the hurdle you guys can’t seem to circumvent.
Gold, on the other hand – is NOT a commodity. It CAN escalate in price without a damaging effect on industry or the marketplace. This is why CBs hold Gold and not Silver… or pork bellies, or wheat, or oil.
If you are also anticipating that the CBs will be hurt by this upcoming paradigm shift, I think you should know better by now. They control the MoE (Medium of Exchange) – and they aren’t going anywhere. Even in Hyperinflation – they will control the new medium of exchange.
Bill, who owns all the Gold in the world (170,000 tonnes)? Sovereigns, CBs, Elites… and a very few shrimps (like us). The only solution to this is to revalue Gold – and nothing needs to happen for that to occur – except remove support from the paper market (which is happening)
So, I expect the paper price to keep dropping (and to no surprise – you will all be wrong) and then Gold won’t be purchasable.
Bill – if Oil goes up 80X its current price what will happen? Mad Max, right?
How about food? what if it goes up 80X – ditto
What if Gold goes up 80X? answer: nothing.
7 Trillion in Gold (today’s price) will be worth 560 trillion – and those with the Gold will own EVERYTHING – all the Mal-inflated debt etc.
Beaver, have you read many of my past articles? A revaluation of gold is something I have written about for many years, it must be done to reliquify many central banks. ONLY the central banks who do actually have gold will be reliquified. What I believe you are missing is that the “management” is being done with derivatives, some day out there “delivery” must be made which is when supply and demand will reassume the pricing mechanism. Your very last line sums up the reality quite well in my opinion.
As usual, you are spot-on, Bill. It is certainly something I would do — along with holding a kill switch on the U.S. Treasury market — if I were the Chinese.
I look forward to the Chinese and Russians putting our criminal government and financial system on ice, and soon.
thanks, we’ll see John.
Bill, great article, as always. Good mindset. I’m sending you the sincerest regards all the way from Belgium. We do this together. It’s coming. Fun? No. Changing? Yes. Thanks for all the GREAT articles. Please know that you provided life changing information. Also, people need to learn to READ the words of the knowledgeable. Mr. G.
Thank you for such kind words Mr. G!
Nice take on the theme but I think I your focus is too much on the costs, not the benefits. If you add that to this analysis I think your point has even more merrits. Please let me elaborate.
To do a rough calculation since I really wont look up all the stats, I leave that to the experts (smile). I will add gold to this calculation since the correlation is has on the Comex.
I use conservative numbers here, say since the take down they imported 4000 tons of silver each year and 1500 tons of gold each year. Say the average silver price was $22.50 the last 3 years and gold $1250 the last 3 years (and ignoring the 1900+ ounce peak I select $1800).
So each ounce of silver saves China $17.50 and gold $550. Now that works out too….
32150 Oz = 1 ton
31250 * $17.50 = $546.875 *12000 (tonnes) = $6.562.500.000
31250 * $550 = 17.187.500 per ton times 4500 tons = $7.734.375.000
After all, if I remember well, only ounces count in the end…. By investing $15 billion in silver they gotten the kill switch in both pm markets (since the correlation) and since their import costs went way down…. Thee years later it costed them almost nothing if one adds the expenses they did not have and from next year on, they will be starting to earn money on that investment. Either by reduced import costs or upward (fiat) price movement on the metals.
Now how did that investment work out for them? To me it seems a very expensive deal for the west, and very lucrative for China. The art of war they also apply in the currency/money arena….
Iam sorry, some sloppy calculus here. The currency they saved on gold imports are actually 77.343.750.000 so they have their investments back already if one thinks ounces and not fiat.
I think your analysis is brilliant and probably at least partially true. But what are the big banks doing? Could they be simply buying and selling to each other, colluding to suppress price? And what about us? Is there any chance of this ending sooner rather than later? I just went back and re-read your February posts where it seemed the end was nigh. But at this point it looks like the suppression may go on forever.
the tent can come down on any day for almost any given reason now.
Seems to me, both silver and gold are vulnerable to ‘kill switch’. The last time i looked, there were up to 100 times gold futures as held in the comex inventory. Certainly there are many Billionaires capable of causing a default by Comex..as well as most nations…but where is the benefit? The Comex paper game is puny compared to the derivatives rockslide hanging over the TBTF banks. As a lever in peacetime the US Gov. could easily paper over a Comex default…with very little money. If there was a ‘Hot’ war, the Gov’t could easily portray this to the public as ‘enemy action’ …and again,paper it over. If i were China, i would be far more concerned with getting some value for the trillions it holds of US debt. Besides, cheap Gold is what China wants for now.
silver is a tiny market compared to gold.
Seems like market manipulation by the banks, to me. The O.I. went up in Q1 after the rally. We know the banks talked to BHO in April 2013. I’m guessing they borrowed some metal from the gov. at that time.
it wasn’t silver as that stockpile is long gone.