Thursday, January 5, 2012

Ted Butler: Commercials Have No Interest in Shorting Silver Again

Ted Butler has allowed the publication of a few paragraphs from his latest private subscription report, which includes some doozies. 
Butler believes the short squeeze that took silver to $49.73 in April has taught the commercials how tight the physical silver market actually is, and that the commercials "appear to have no interest in massively shorting silver again".  As a result, Butler looks for silver to make massive gains in the near futures, as the commercials turn and go net long, resulting in $50 silver appearing "cheap" in the near future.

The big commercial silver shorts had a near death experience when the price approached $50 in April. They were at the end of their rope and needed to do something in a hurry. That’s why they rigged prices lower; so that they could buy and save themselves. These well-connected commercials knew, perhaps for the very first time, just how tight the silver market had become and how close we were to a profound physical shortage. The key is that the silver shortage wasn’t caused by excessive speculative buying or a bubble or a mania. The extreme tightness and near shortage in silver was as a result of the gradual and cumulative impact of normal investment buying over the past five years. There is nothing to suggest that the long term and steady silver investment buying has ended.

Because there was no bubble or mania in silver, there was no bubble to burst. The orchestrated take-downs of the price by the big commercial interests were simply so that these commercials could buy and rid themselves of silver short positions. That’s done now. That means that the silver market is now in the best possible shape.
What lies ahead for silver is exciting. While we have not witnessed a bubble in silver yet, we will some day. The silver story and the dynamics of the market are too compelling for an investment mania not to emerge at some point. If anything, speculative sentiment has been completely wrung out from silver, clearing the way for speculators and investors to enter the market with a vengeance. At some point, enough of the world’s industrial silver users will panic as prices climb and attempt to build physical silver inventories. This user buying, something that never kicked in during the run to $50 will create a silver shortage, the likes of which never witnessed before. It seems that the big commercial interests have come to learn the real silver story and they appear to want no part of the short side again. The major pressure of selling has passed...and the way seems clear for higher prices. By the time the next chapter in the silver story plays out, $50 could look cheap.
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