Why wouldn’t JPMorgan go short on the next silver rally, in the expectation and perhaps full knowledge that it would succeed in adding new shorts to contain the price and be able to buy back those shorts at a profit yet again? I don’t have just a few reasons to expect that JPMorgan might not add to its silver shorts again, but rather a few hundred million reasons – its massive physical stockpile, acquired with almost maniacal precision over the past near 7 years.
The combination of its continued accumulation of physical silver, most evident in JPM’s 12.5 million oz stopping of COMEX deliveries so far this month, plus its much more massive short covering in COMEX paper and SLV (as much as 80 million oz combined) has brought JPMorgan to its largest net long silver position ever. I’d peg the bank’s COMEX short position to be 25,000 contracts (125 million oz) and its total physical holdings to be at least 675 million oz, meaning JPM is now net long 550 million oz, its largest net long position ever. This means that JPMorgan now stands to make a net profit of $550 million for every dollar that silver advances in price, $5.5 billion for every ten dollars higher and $55 billion for every hundred dollars higher. In essence, there are now 550 million reasons or more for JPMorgan not to cap the price of silver on the next rally.
Because a big rise in the price of silver would benefit JPMorgan the most and because the bank understands this better than anyone, it stands to reason that it is just a matter of time before JPM takes the action that would most benefit itself. Actually, the “action” that would benefit JPMorgan the most in silver is not any action at all; in fact, just the opposite. I’ve long maintained that all JPM had to do to most benefit itself is to do nothing, simply not add to short positions. That’s easier than falling off a log or slipping on the ice. My point is that there has never been better set up for JPMorgan to do nothing and make itself a windfall. — Silver analyst Ted Butler: 13 December 2017