Obscenely High Concentrated Short Positions in the Precious Metals

Adam Taggart
By Adam Taggart on Wed, Mar 6, 2013 - 4:11pm

Sometimes, a picture is worth a zillion words. 

The chart above (source) shows the ridiculously high concentrated short positions in gold, silver, platinum, and palladium. For example, it would take nearly 150 days of world production of silver to cover the short position held by the top 8 traders.

That so few players are allowed to amass so concentrated a position on the short side is unjust and unfair to investors, as well as insulting to their intelligence.

The regulatory body responsible for ensuring free and fair trading in the commodities market, the CFTC, is at this point a sham. They initiated an exploration of manipulation in the silver market in 2008, which is still categorized as "ongoing", while the whole world can see the evidence of such daily in the predictable precious price smashes and in the footprints left by the big players such as the COT graph above.

Don't hold your breath waiting for the CFTC to magically get its act together. On days like today, when the head of the Department of Justice admits his position that the major banks are too big to prosecute, you need to remind yourself that if you're playing within the paper PM system, the rules are not written (or at least applied) in your favor.

Better to stick to buying (and holding) physical, and wait for the laws of reality to reassert themselves.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.


Denny Johnson's picture
Denny Johnson
Status: Gold Member (Offline)
Joined: Aug 13 2008
Posts: 348
It must be the sequester

Sequester Will Harm Effectiveness of the CFTC

CFTC Chairman Gensler noted on financial television that the sequester will make the enforcement efforts of his agency to police the markets harder, and it will be more difficult to 'stop the bad guys on Wall Street.

Isn't he the one that just went to court and filed a brief in support of market manipulators to overturn the Federal Energy Commission's successful $30 million fine against an Amaranth natural gas trader because the FERC was doing 'his job?'

Chairman Gensler also noted today that LIBOR is useless for ensuring the integrity of commercial business interest rates.   Can't dispute that testimony.

Not to put too fine a point on the irony, but speaking of concocted numbers without genuine merit, and of little value in setting prices for the real economy, has the Chairman looked at the silver futures markets lately?

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Well one interesting little development

Certainly there is manipulation as cited above by the big players.  At this point I think you just have to accept that as part of the game.  Yesterday, (Weds the 6th) mining shares rose significantly in spite of the paper price staying neutral (ie artifically depressed).  I'm wondering now if the stocks are just having a typical rebound after that long drop or if maybe they are beginning to follow the fundamentals or, to put it another way, the physical market.  There certainly are bargains - "blood in the streets" as the saying goes - but could they still take another dip lower?   Sure.  I give a 50/50 chance at this point. I'm moving in to the stocks again, but slowly, and hedging the downside.  We shall see.

One thing I do believe is that the physical markets and fundamentals will prevail in the long or even medium term.  I encourage everyone to try to keep the big picture in mind.  I'm sure that there are very powerful influences who would like to see Gold at 250 right now, but they can't do that.  They couldn't keep it from rising to this point either or they would have.  So, the control/influence is only so much and only for so long.  You just wait until some truly righteous  moment when all those shorts are caught covering in an upward jolt that they can't control.   It'll happen one of these fine days.   Patience. Remember, PMS are some of the most volitile markets on earth.   Control your emotions.  Keep plenty of Pepto Bismal on hand.    Don't lose sight of the forest for the trees.

goldrunner1's picture
Status: Bronze Member (Offline)
Joined: Apr 20 2009
Posts: 28
Market Manipulations and Price Controls

If you think about it market manipulations such as were seeing in the precious metals market are just covert and sophisticated forms of price controls. They are no different than price controls that have been enforced recently by failed regimes such as Argentina and Venuzuela. If history is any guide these price contols always fail and create an opposite of the desired reaction.

thc0655's picture
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1744

If you guys keep complaining so loudly and so often, I'm afraid you're going to ruin these sale prices.  I can't believe I was able to accumulate all through 2012 and the price never shot up like it will eventually.  In 2012 I couldn't believe my luck every time I converted paper to metal.  Now in 2013 I'm starting to count on these sale prices.  So quit complaining or you're going to ruin a good thing.

I'm waiting for reality to reassert itself as it MUST (sooner rather than later), but I'm cherishing every month I get before it does.

Shhhh!  Let's just keep it to ourselves.wink

budwood's picture
Status: Member (Offline)
Joined: Dec 22 2011
Posts: 13
SIlver prices

Although I agree that silver prices are headed up, my opinon is that with all the short interest, we will probably see another short term drop in silver so that the shorts can cover.  Seems that there is enough financial power in those who are short that we may be looking at a drop in silver prices to, perhaps, the $25/oz range.  (My money is where my mouth is - I hold ZSL).

That said, my own investment stategy is to cover and then to increase my silver position soon at continued "bargain" prices and figure on an up-move this autumn.  An up move could be more dramatic than one would expect, as the depreciation of the USD may coincide.  Expect a doubling of money by this time, 2014.

If I am wrong, a silver price of above $32/oz will tell me.  There will be time to recoupe my investment strategy.

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