Jim and I recently discussed the action in silver and the metals markets.
He suggested that the major metal dealers deal every day in great size with all the world producers. This is true for silver and gold.
Within the context of the discussion, it was agreed that the recent discussion as to the size of the short position in silver are ignoring the transaction realities within the metals markets.
The size of the JP Morgan "short" position has be discussed for years. Simply put, bullion banks such as JP, as well as others, are not foolish enough to sit on exposed, naked short positions. Only the public does stuff like that.
The discussion included a description of the hedging tactic of long physical from the producer while shorting paper (futures). This trade can produce enormous profits if the spread is wide enough. As long as profits can be made, the paper side of the equation will appear imbalanced and overstated when viewed in isolation.
Once the profits are driven out by excessive physical demand, the trade will reverse. The likely violent shift will create bag holders, but it won't be the bullion banks. The bag holder group will be defined by the acronym – ETF (holders).
Eric
A Commodity Futures Trading Commission regulator is putting pressure on the agency to take action in a high-profile, two-year-old investigation of the silver market.
The silver market has long been the focus of manipulation theorists.
.At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices. Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn't publicly disclose trader names.
Source: online.wsj.com
Source: jsmineset.com
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