Ted Butler - Worsening Silver Shortage Q&A

We reached out to Ted Butler of ButlerResearch.com to get some of his thoughts on spot price plunges this past month in COMEX silver and COMEX gold specifically.

We sourced a dozen questions both internally and externally too online.

Ted Butler has been analyzing the silver bullion and gold bullion markets for his loyal newsletter subscribers for many decades. Many self-proclaimed gold and silver experts originally found out about precious metals from Ted’s trailblazing writings during the early days of the internet.

Ted’s somewhat recent, yet near decade long public and explicit calling out of JPMorgan as perhaps the kingpin in silver price rigging has been partially validated by criminal charges filed by the US Department of Justice. To date, none of the alleged JPMorgan precious metals executives and other subordinate derivative traders charged with price rigging crimes have been sentenced to US federal prison.

Onwards to our 12 questions for Ted Butler:

1) Now that the entire world, including the United States, is dealing with the coronavirus, what kind of impact will the pandemic have on the paper gold and paper silver markets? Can the supply chain disruptions finally lead to a “force majeure” or “delivery failure”? 

I suppose anything is possible in such tumultuous times, but the risk of a COMEX delivery failure seems less likely following this big price takedown in which the commercials have undoubtedly bought back many short positions. The risk of a delivery default is greater the more the commercials are net short. 

2) The stock market gets circuit breakers at 7%, 13%, and 20%, but on Sunday evening silver futures plunged over 7%, then over 10%, and then over 20% peak to trough, are there circuit breakers for silver, and if so, how would they be used? What are some other ways the paper gold & silver markets are set-up to perpetuate the active gold & silver price suppression policies?

There are circuit breakers of some sort on the books but never activated in gold or silver to my recollection, but the essence is that they are expandable during the day and, in effect, are not really circuit breakers, but more like speed bumps.No limits apply on options last I looked.

The price suppression is based upon the commercials knowing what their principle counterparties, the managed money traders, will do when the commercials rig prices higher or lower. If the managed money traders didn’t always buy on rising prices and sell on falling prices, there would be no manipulation possible. I know that sounds simple, but it enables the commercials to control prices. 

3) The last couple of years saw a lot of hope in the gold & silver community that the Justice Department was actually bringing some justice to the gold & silver markets, but with this curveball that is the coronavirus, it seems talk about progress being made has stopped. What is your outlook for any justice taking place at this point? 

I don’t know that the coronavirus is to blame, but I concluded long ago that the DOJ wasn’t going to crack down on JPMorgan because the bank is too systemically important. I wonder why the DOJ got involved in the first place.

4) Friday, Mar 13 and Monday, Mar 16, paper silver has been crushed but physical silver prices are largely unchanged with premiums sky-high. How long can the disparity between paper and physical prices last? On a related point, is the physical supply shortage real or just a short-term blip?

I don’t think the disparity can last indefinitely, but the idea that prices can get plummeted with physical shortages of any kind is nuts. The only reason Toilet Paper prices haven’t plummeted is because there is no TP futures trading on the COMEX.

The silver (and gold) shortage is mostly retail oriented, but there is absolutely no sign of large physical selling on a wholesale level and the only reason prices have sold off is due to paper trading on the COMEX. Importantly, the selling has not been by the commercials, who have been very big buyers. That’s the essence of the scam.

5) How much did the 7 big shorts have a hand in driving down silver prices over the last week? Have their short positions been increased, or was the price action a result of mass liquidity/margin calls?

The 7 big shorts have just made back, on paper, the entire $7.2 billion they were out as of March 6th, 2020. You tell me if they just got lucky or played a role in the decline. Their short positions didn’t increase on the price decline this week, but I won’t know how much they might have bought back until this Friday’s COT report.

 6) What do you say to someone who argues that one holds PMs to protect us from events like the one we are living through now, but in retrospect, holding cash would have been the better option?

That this is the ultimate proof that the price has been manipulated. 

7) What might it take to start seeing the current silver bullion shortage i.e. rising silver bullion price premiums per ounce vs derivative divergence show up in gold bullion?

Well, gold and silver are different commodities, so I’m not sure. I will say that there is not a primary silver miner making a profit at current prices, while all gold miners are still producing profitably at current gold prices. 

8) The Comex GSR is at 120 roughly intraday today Tuesday, March 17th.

Only during 1933-34 was it ever higher in written financial history.

Yet the current American Gold Silver Eagle Coin Ratio is around 76. 

^^^ See those CHARTs: What is this telling us? ^^^

That silver is obviously manipulated in price. 

 9) QE1 was started late 2008 in response to the last deflationary financial bubble burstings, the gold spot then did a 1.5X in fiats, while silver spot did an over 5X move in fiat $USD following.

QE4ever is now officially starting.

How many valuation multiples might we see for bullion in this next commodity bull peak following this deflation?

I would imagine a lot.

10) With escalating Trillion$ being bandied about in bailouts and REPO loans, which on the G-SIB list of megabanks (see the 7:15 mark) would you expect to go belly up in the next financial crisis?

That I wouldn’t know.

11) The 1990s COMEX silver drain is lost on most onlookers today. India alone takes some 200 million ounces a yr themselves. Silver bullion buyers in 2015 took over 200 million ounces themselves. China’s solar offtake will continue as they manufacture more after this deflation pandemic and the financial bubble burst. Billionaires like Scott Minerd is now a regular on Bloomberg and CNBC, and that bond king has been beating the drum on silver since it was priced at $35 oz in 2012.

How fast might this next silver COMEX drainage happen? 

Hard to tell, but I would imagine the price will move higher much faster than the inventories decline.

12) None of us know how much longer we are blessed to be alive. Many silver bulls probably feel like bag holders at the moment, many have passed on in wait for this bet to pay off. Obviously your legacy will outlast this current CME Group COMEX suppression allowance running regardless. 

But like many of your followers, do you ever get angry and or depressed from feelings of injustices ongoing, etc? Thinking you might miss out on seeing your thesis fully proven correct (2009-2011 run excluded) with the exponential price manias to come?

All the time, but it’s important not to get bitter and stay positive as long as the facts tell you to persevere. Whiskey helps too.

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