Mysterious Metal Movement

The hit movie from 1996, “A Time to Kill”, based upon the novel by John Grisham, had an all-star cast, including Matthew McConaughey, Samuel Jackson, Sandra Bullock, Kevin Spacey and Donald and Kiefer Sutherland among others. It concerned the rape and beating of a young black girl in the racially-divided rural Deep South, the subsequent killing by her father of the two white rapists and the trial that followed the father’s killing of the rapists.

The film’s highlight was the moment during the trial when the father’s lawyer asked the jury to close their eyes and imagine the suffering of the young girl while he described the depravity in lurid detail. Just when the images reached what had to be a climax, the lawyer suddenly shocked everyone by then asking them how they would have felt had the little girl been white and not black. That was the turning point in the trial that ended with the father being found not guilty. 

I invoke that scene today to revisit an issue I have written endlessly about since first uncovering it more than seven and a half years ago in April 2011.  That was when an unprecedented physical silver movement commenced in the COMEX-approved warehouses which has continued to this day and very recently has accelerated to absolutely astounding levels – an average weekly physical movement of more than 9 million ounces over the past five weeks, or more than 475 million ounces on an annualized basis. That’s fully 60% of total world annual production, basically being physically moved in and out of 6 warehouses in and around the New York City area. To be sure, this is purely physical silver movement and is not to be confused with paper trading.

Over the past seven and a half years, more than 200 million ounces of physical silver has been moved annually in and out of the COMEX warehouse system, as reported in daily COMEX warehouse releases. In total, more than 1.5 billion silver ounces have been so moved over this time, roughly corresponding to the world’s entire total inventory of silver in the form of 1000 oz bars. I’ve recounted this highly unusual physical movement weekly since it began in April 2011, all the while noting that was when silver ran to $50 and then collapsed and how that was when JPMorgan first opened its COMEX silver warehouse and began to accumulate physical silver – all while remaining the leading short seller in COMEX silver futures. Starting from zero back then, today JPMorgan holds more than 147 million ounces of silver in its own COMEX warehouse, more than 50% of the total 291 million oz of silver ounces held in the world’s second largest visible depository of silver (the big silver ETF, SLV, holds the most visible silver in the world, some 330 million ounces and not coincidentally, JPMorgan is the custodian for that metal). As I have contended for ten years, JPMorgan is the kingpin of the silver (and gold) market in every way possible.

So what the heck does the frantic and unprecedented physical metal movement in and out of the COMEX silver warehouses have to do with a hit movie from twenty years ago? Just this – close your eyes and imagine for a moment that what has been occurring in the COMEX silver warehouses had been happening in gold instead. I’ve heard more cockamamie stories about gold to last a couple of lifetimes; stories about eligible vs. registered COMEX holdings and the ratio to paper open interest, wacky EFP theories about delivery obligations being transferred to London and about pending COMEX delivery defaults prior to every first delivery day for years.

I’m firmly convinced that people’s heads would explode if what had been happening in silver had been instead occurring in gold. If the same type of physical movement had been occurring in the COMEX gold warehouses as has occurred in silver over the past nearly eight years, it would dominate the conversation – little else would be discussed.  And even more would be made of the issue if the frantic movement were occurring solely in gold and not in any other commodity, as has been the case with silver. Please remember, the COMEX silver physical movement is available on a daily basis (for free) and I know it is being viewed by many – since total COMEX inventories are referenced regularly.

So why is the frantic COMEX silver warehouse physical turnover not a subject of widespread attention (where it would be impossible to avoid were it gold)? I think it has to do with it being very difficult to explain exactly why it is occurring. There is no question it is occurring (as the thought that it is some type of intentional misreporting is too absurd to contemplate), but there are no easy answers as to why the unprecedented physical silver movement is occurring. Unfortunately, the documented frantic physical silver turnover doesn’t come with an explanation manual. We can easily see it is occurring, just not why. That’s a combination that demands analytical attention.

Aside from it being absurd to conclude that the silver movement is not occurring and being deliberately misreported, it’s also absurd to think it is some type of “make work” project, solely intended to employ truck drivers and warehousemen. For sure, there is a reason for the physical movement, as well as a reason for why it exists only in silver. While I am open to any and every alternative explanation, I can’t help but think that the movement is the result of extraordinary physical demand.

COMEX silver is being moved because it is demanded. Further, given the timing for when the movement started (April 2011) and the myriad clues around that date for silver and JPMorgan, I am convinced that the demand prompting the unprecedented turnover is due to demand from JPMorgan. Specifically, I believe JPMorgan, in addition to the 147 million oz it has accumulated in its own COMEX warehouse, has skimmed off hundreds of millions of ounces more, held either in or out of this country.

Unfortunately, I seem to be operating in an echo chamber, as I am aware of hardly any other commentator willing to acknowledge the easily documented COMEX silver turnover, no less attempt to explain it. When it comes to silver and particularly gold, there is never a shortage of explanations for just about everything under the sun. But in the matter of the unprecedented physical metal movement in the COMEX silver warehouses, there’s not even the chirping of crickets. Go figure. Please feel free to inquire of any commentator you have access to and pass along any responses to me.

And this is just but another example of unanswered mysteries surrounding silver. Others include the fact that JPMorgan has never taken a loss when adding new COMEX short positions in silver (or gold) over the past ten years, only profits. And that JPMorgan has remained the largest paper COMEX short while at the same time accumulating massive amounts of physical silver and gold. The real mystery, of course, is why the CFTC or JPMorgan won’t even address these concerns. One thing that’s not a mystery is that JPMorgan is positioning itself for a monster move up in price and so should you.

Ted Butler

www.butlerresearch.com