No Way Out for Silver Shorts as They Desperately Cover
In a recent Commodity Culture interview, longtime precious metals analyst Ed Steer described the sharp drop in silver as a deliberate smash by bullion banks rather than a free market event.
Silver fell more than 6 percent in a single day while gold declined about 1.6 percent after the release of a CPI print that showed a 3.7 percent increase. Steer dismissed the official inflation number. “I think you can safely turn those numbers around and say it’s more closer to 7.3 percent increase cuz you can’t believe any of the numbers that are coming out of the BLS.”
He framed the selloff as another round of the same pattern that has repeated since the end of January. “This was just a bear raid to cover as many short positions as they possibly could. This is just part of the wash, rinse, and spin cycle that the bullion banks have put us through since the crash back at the end of January when things almost got away from them.”
Steer said the commercial traders pulled bids, spoofed, and used every available tactic once the CPI number hit. “This price correction you’re seeing is manufactured. It’s not happening by free market forces.”
Commitment of Traders data reinforced his view. Even though gold was down roughly 1,400 dollars an ounce from its January peak, the short position held by the eight largest commercial banks was larger than it had been the week before the January smash. “They’re mega mega short gold right now.”
The silver short was even more precarious given the physical market. Steer pointed to a chart of days of world production needed to cover the short positions of the largest traders. Silver sat at the extreme right of that chart, with the eight largest traders short more than 100 days of world mine supply. “The four largest traders hold the largest short position in silver.” He noted that this structure has looked roughly the same for 25 years.
Physical metal is leaving the system at the same time. Steer cited more than 2.2 million ounces of silver shipped out of the COMEX on one recent Friday and 13.4 million ounces over six business days in early October. September had already seen a net outflow. “The amount of silver being shipped out of the COMEX and out of Shanghai has been extraordinary over the last two or three weeks.” He stressed that every ounce sitting in COMEX or LBMA warehouses already has an owner. “There’s a name tag on every one of those things. And sooner or later we’re going to get to the bottom of the barrel.”
Steer treated the weakness as a buying opportunity. He said he planned to buy the next day regardless of the PPI reaction. “You should be a buyer when blood is running in the streets. I’m going to be a buyer tomorrow no matter what happens.” He reminded listeners that he bought gold near 500 dollars and silver near 5 dollars more than two decades ago and remains comfortable holding. Central banks and China continue to accumulate on dips. “If they’re buying it, that’s a good sign that everybody should be buying it as well.” He expects China to eventually announce much larger official gold reserves than currently reported and to set the price in its own market rather than on the paper exchange in New York.
On longer term issues Steer was blunt. He sees little chance that massive sovereign debts will be repaid in anything other than heavily devalued currency. “The death of all fiat currencies is inevitable. No fiat currencies ever recorded has ever survived.” He has no interest in 10 year Treasuries yielding around 5.3 percent when real inflation is far higher. “I wouldn’t invest any money at 5.3 percent myself. I’ll take my chances in the gold market.” He also dismissed talk of gold backed bonds as background noise amid what he described as widespread corruption and insider activity in Washington and on Wall Street.
Steer closed by linking the metals suppression to the broader decline of Western financial power. “The West is in decline and their price management scheme is coming to an end as is the empire that brought it about. We’re living through the last days of Rome.”
In his view the bullion banks are running out of ways to escape the short positions they have built, while physical metal continues to move into strong hands in the East. The latest raid, he argued, is simply the latest attempt to delay that reckoning.
