Is China Behind the Big Silver Short?

[Joanne98]

The respected silver authority, Ted Butler, speculates in his recent December 21st article, “A Show Stopper,” that the Chinese are behind the big concentrated short position in COMEX silver, which is currently about 300 million ounces among the eight largest commercial traders (and 500 million ounces total). The biggest single short position in COMEX silver in 2010, presumably held by JP Morgan (JPM), has been as high as 35% to 40% of total short interest according to CFTC commissioner Bart Chilton. This is a staggering concentration, obviously intended to suppress the price of silver, and has gone on continuously for several years at similar levels.

Butler goes on to say “that would not appear to make sense” and “It will go down as the single dumbest trade in history.” But I believe that Butler has underestimated the Chinese.

What if the Chinese were going long buying silver on the COMEX and taking delivery, draining silver inventories, while simultaneously shorting silver on the COMEX and settling those contracts in cash or rolling them forward?

Even if they took a loss on all their shorts, they would still be steadily accumulating physical metal, and the net result would be that they would be steadily and covertly acquiring physical silver at a higher than market price, but still keeping the market price suppressed to their own industrial producers, while at the same time propping up the weak currencies of the world’s buyers of Chinese exports in developed countries.
Only about 2% of COMEX silver contracts are actually settled by physical delivery, and the rest are settled for cash or rolled over. All the Chinese would have to do is take delivery on a greater quantity of physical metal from their longs than was demanded to close out their short positions, and they would be constantly accumulating physical silver without ever spiking the COMEX silver price.

http://seekingalpha.com/article/243617-is-china-behind-the-big-silver-short

An interesting theory.

[Paper Roses]

1. Help me here. Does this indicate that the price of silver per troy oz

would go up or down? I do not understand the economics of precious metals trading..or any trading for that matter. I do, however, have a lot of silver (925) that I will someday scrap. I do know the percentages that the buyer is probably going to pay and that I will not be paid market price.
Profit for buyer, refiners fee etc. I have been holding onto this stuff because my children do not want it and I have no other way to sell it except to a jeweler or PM buyer. I do know enough to shop around. The problem is, when? I have weighed most of the flatware and hollowware and think I have between 250 and 300 troy oz of 925.

Yes, I know that no-one really knows whether it will go up or down. Articles like these serve well those who understand. What do you think of my situation?

[stockholmer]

2. links to learn about silver, gold, macroeconomics

http://maxkeiser.com/

http://www.financialsense.com/financial-sense-newshour

http://kingworldnews.com/kingworldnews/Broadcast/Broadcast.html

http://www.zerohedge.com/

http://jessescrossroadscafe.blogspot.com/


cheers

[dkf]

3. Selling short is just selling without owning the position.

And just like any other sale will being prices down. But the trick is that they are big buyers of the metal for industrial production so it's more sophisticated.

[Art_from_Ark]

4. I can't understand why none of your kids wants your silver

It's almost like cash (if it's stamped Sterling or .925) and I've seen ads in coin publications offering at least $18.50 per ounce for flatware (which is actually a bit low). But even at that low price, your holdings could be worth $5,000 or more at current buying prices.

[roamer65]

5. Remember the movie "Rollover"?

The idea is to get out of the dollar without causing a currency collapse.

That requires very intricate and shrouded financial transactions.