Clarifying the column headlines in the chart in Ted Butler''s commentary


By Theodore Butler

The latest Commitments of Traders Report (COT) was a
shocker for gold, as the tech funds plowed onto the long
side and dealers went short in massive numbers.

Adjusting for the trading since the Tuesday cutoff, the
commercial net short position in COMEX gold is at the
highest level ever. This raises the strong possibility of a
selloff, where the funds sell out their long positions and
the dealers buy back shorts, as has occurred every time
the dealers have previously reached record short position

Of course, it is always possible for the dealers to be
overrun when they are holding giant short positions, but
that has yet to occur in gold.

For those who doubt that the dealers can orchestrate and
engineer the funds in and out of the markets, as I contend,
it might be instructive to review how the dealers
manhandled the funds in the sugar market recently. I have
rarely witnessed as severe a beating of the tech funds by
the dealers in any market as what just took place in sugar.
That the regulators sit by and allow speculators and
speculating commercials to set and control the price of
vital commodities with paper games is outrageous.

Of course, there is no guarantee that the dealers will prevail
in gold and succeed in flushing the tech funds from the long
side once again. For instance, there is strong evidence that
the dealers lost big, for the first time, in copper over the past
few months, as strong physical demand bailed out tech funds
longs and the dealers actually covered short copper positions
to the upside. In fact, this is the litmus test for determining
whether the dealers have been defeated or not in a market
-- whether they close out positions at a loss after a big net
position has been established or whether they just keep
adding to a losing position until they overpower a market

In my mind, the only way for the dealers to be defeated
after they have taken a large net position (long or short) is
for the real physical market to trump them, like recently
happened in copper. I'm describing the rare instance of
the dealers actually losing (being overpowered by the real
physical market), which is, by law, how the markets are
supposed to function all the time. The real world of supply
and demand should be setting the price continuously, and
not be the rare exception. That's why I claim that these
paper-trading games are manipulative.

Since gold is not an industrial commodity, like copper, it is
not likely to experience an industrial physical shortage. This
makes it easier for the dealers to maneuver the tech funds
in gold. This is not to say that the buyers of physical gold
can't be more aggressive than the sellers, causing the price
to rise, just that gold is unlikely to be in an industrial
shortage, like copper, steel, or silver.

So when the dealers put on a record net short position, like
now, it would take something other than a physical shortage
to cause them to panic and cover those shorts at a loss.
That "something" has yet to occur in gold, as the dealers
have yet to panic and cover at a loss. It appears that the
dealers and tech funds have basically broken even for the
past 15 months or so in their COMEX gold trading. The
price of gold has advanced over that time, so I'm not
suggesting that the dealers have been cleaning the tech
funds' clock in gold, as they did for many years. What I'm
suggesting is that the dealers continue to maneuver the
tech funds in gold, and even if they aren't booking big
profits, they aren't losing big either.

There has been no COT dealer defeat in gold (yet), and the
next time will still be the first time.

What about silver?

Whereas gold has just experienced a big jump in
commercial shorting, silver's COT position has remained
near a record net dealer short position for months. While
this has not prevented the price of silver from climbing
sharply, the dealers haven't covered their shorts as they
have in copper. Therefore, the issue is still open and

As in gold, the dealers, as a group, have yet to cover their
short positions in silver at a loss. My sense is that the
dealers have set the tech funds up on the long side of
gold, in the hope that a resultant selloff in gold will cause
a corresponding selloff in silver.

While it remains an open question as to how the extreme
COT positions in gold and silver will be resolved, there are
a number of important things we can say specifically
about the silver short position.

As you know, I have long maintained that COMEX silver
has the largest short position of any commodity in history,
when compared to world annual production and total known
world inventories. You've never seen anyone contradict that
statement, nor will you. Today I'd like to examine the
extreme silver COMEX short position in some new ways.
As always, I'll try to rely on the public record and common

Let's look at the public record. Each week the Commodity
Futures Trading Commission releases the COTs for all
U.S.-traded commodity futures. The positions of traders, by
categories, is listed on both a gross and net basis. Net is,
obviously, smaller than gross, and is more "pure," in that it
represents the true overall position by category.

Looking at the net commercial short futures position for all
real commodities traded (leaving out financial futures),
COMEX silver still stands out like a sore thumb when
compared to all other commodities.

Even on a net basis, the short commercial position in silver,
at nearly 500 million ounces (including options), almost
equals total world production, while most commodities have
a commercial net short position rarely greater than 5 to 10
percent of their respective world productions. Some
commodities (cotton and cocoa) don't even have a current
commercial net short position, as the dealers are net long.

In fact, over the past 20 years COMEX silver is the only
commodity in which the commercials have always been
net short. The commercials have been significantly net long,
at some point(s), in every commodity except silver.

You should be asking yourself: Why are the commercials
always net short in silver, and why are they usually net
short, as now, in amounts many times larger than any other
commodity, when comparing net short positions and
respective world productions?

What is it about silver, alone among all commodities, that
attracts such massive commercial shorting, consistently
for 20 years?

There is another clear aberrant pattern that comes into focus
when comparing the commercial category of silver and the
other major commodities, as posted in the COT, for positions
as of March 23. Major commodity is defined as one having a
total futures open interest of at least 75,000 contracts.

When you compare the gross long commercial position, to the
gross short commercial position of every major commodity in
the current COT (futures only) report, you see that the gross
short position rarely doubles the size of the gross long position.
(A gross short twice the size of a gross long equals a 2.0 ratio.)
Here's the actual breakdown (in contracts):

Commodity Gross Gross Short
Commercial Commercial Ratio

Wheat (CBOT) 63,555 100,288 1.58

Corn 291,610 469,505 1.61

Soybeans 97,222 166,079 1.71

Soybean Oil 71, 324 151,413 2.12

Soybean Meal 89,788 142,870 1.59

Live Cattle (CME) 50,818 62,395 1.23

Cotton 51,358 51,198 1.00

Cocoa (CSCE) 84,053 70,220 0.84

Sugar 114,630 217,011 1.89

Coffee 41,838 82,971 1.98

Heating Oil (NYMEX)92,092 113,815 1.24

Natural Gas 185,484 210,214 1.13

Crude Oil 387,245 483,735 1.25

Unld. Gasoline 81,350 30,204 1.60

Copper 27,411 54,600 1.99

Gold 49,762 204,617 4.11

Silver 10,670 97,561 9.14

Certain numbers should jump out at you, namely, the ratios
of gold, but particularly of silver. Why are the commercials
so lopsided in their short versus long positions in gold, but
especially silver?

These are aberrations that demand a reasonable explanation.
Let's first eliminate what isn't a reasonable explanation --
because the price is up. The price of many commodities on
this list are up, and there is no lopsided ratio. That's because
commercials should have legitimate hedging needs on both
sides of the market in a rising price environment, such as
users protecting themselves. In most of these commodities,
it is clear that there is significant and legitimate commercial
long side participation, even though the short side may be
larger. In silver, it should be obvious that there is virtually
no long side commercial participation. Let's cut to the chase
and explore why that is so, even though the last thing we
need is still more evidence that silver is manipulated.

There is one reason, and one reason only, why the
commercial dealers are overloaded on the short side and
barely inhabit the long side in COMEX silver -- because there
is no competition between the dealers. They are all reading
and acting from the same playbook. They act in unison.
They never break ranks with one another. They operate as
one against all comers -- the tech funds, the big and small
speculators, the real silver value investors, and anyone who
stands to gain from a free silver price.

The silver commercials are a disciplined and unified wolf pack,
kept in tow by the leaders of the pack, the Silver Managers.
This wolf pack operates by the rules of force and the wild,
and not by the rule of law. The pack is protected and coddled
by the CFTC and the NYMEX/COMEX.

The key feature of the silver dealer short wolf pack is that it
is operating against the laws of true supply and demand. Nothing
that they are doing is in conformity with legitimate economic
purpose, save one -- take as much money as possible, the
law be damned. And stay alive.

Aberrant short figures and ratios aside, there is no sound
economic reason for holding the largest short position on
record in a commodity in a structural deficit. I'd like to see
someone step forward with a plausible and legitimate
explanation for a net short position, of anything, greater
than what exists in the real world. And this epic short
position didn't materialize as a result of the recent increase
in price, as it was just about as obscenely large $3 lower.
It can't be covered to the upside without destroying the
wolf pack.

For that reason alone, the manipulation couldn't be more

You've read, many times, where I highlight how
unprecedented the COMEX silver short position is compared to
world production and total known inventories. It doesn't matter
if I'm talking of total gross or net position, held by all the
commercials or just the concentrated largest traders; it's
always bigger than known bullion inventories, currently no
more than 150 million ounces.

But even that vastly understates the real short story. That's
because the commercials don't control anywhere near that
total 150 million ounces. They'd be lucky if they controlled
10-20 million ounces of that total. There's a verified and
documented net short commercial position of nearly 500
million ounces and they have less than 2-4 percent in real
silver backing. Their short position may be 50 times larger
than what they really own.

No wonder they stick together. If one breaks rank and
covers to the upside, they all will perish.

There has never been, in all of financial history, such a case
as we have in silver, where the public has been so favorably
aligned against the insiders. The public holds a long position
that cannot collectively be shaken out. The insiders hold a
short position that they can't collectively deliver against in
a thousand years. All the insider shorts can do is to stall
to shake out as many longs as possible.

The short insiders must resort to spreading false private
stories of fading silver demand, while the true stories of
delayed delivery, whether on the COMEX or the silver
purchased by Central Fund of Canada, are open to all.
(In another recent public offering, CEF has committed to buy
another 5-6 million ounces of real silver, even though they
haven't received the last million or so ounces from their
previous stock offering, four months ago. They've been told
it may take three to six months for the new silver to be

Does that sound like fading silver demand?

Think I'm overstating the cohesive and predatory pack
behavior of the commercial silver shorts?

Play a little mind game with me. Imagine, if you would,
that the tables were reversed. Instead of the dealers being
massively short silver, imagine that they were massively

I know it is hard to realistically picture anyone else going
short to the extent necessary to enable the dealer silver
wolf pack to be massively long, but just imagine it did.
Knowing what you know about the real silver fundamentals
and the deficit and evaporating inventories, etc., and adding
the silver wolf pack being long and not short -- what price
would you put on silver when the wolf pack longs put it to
the hapless shorts? $100? $500? $1,000?

But the commercials have a record net short position, and
not a record net long position, so you must behave
accordingly. The wolf pack is always on the prowl for
unsuspecting and innocent victims. Don't expect help from
the regulatory authorities, as they are a big part of the

Don't expect the miners to fight back.

You must arm and defend yourself.

How? Easy. Rely on your common sense. Hold only fully
paid-for positions. Don't hold leveraged positions that you
will be forced to jettison and lose in a sharp selloff. Prepare
and steel yourself for the coming volatility.

Let's face it -- we can't control the volatility. All we can
control is our reaction to it. Focus on the long term. If the
pack succeeds in engineering one more manipulative selloff, put
it to your advantage by being prepared to buy, both financially
and emotionally.

Even when the COTs stink, like now, you must hold a full core
position because, in the long run, we will go shockingly higher,
probably without notice, as the fundamentals play out.

The bad news is that any selloff, if it comes, is likely to appear
disorderly and designed to frighten those who are unprepared.

The good news is that any selloff should end dollars higher than
the average prices of recent years. Now is the time to harden
your resolve about silver and prepare for whatever the
increasingly desperate shorts throw your way.


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