Not only do we have clear proof that managed money technical funds bought the equivalent of two full months of world silver production during the last two weeks, we also have clear proof that the price of silver hardly budged in price during that time, unlike what would have occurred in any other commodity. Here’s the punchline – the technical funds would have been willing to pay much higher silver prices than they ended up actually paying, simply because they are technical funds which, by definition, buy as prices rise and sell as prices fall. Maybe if silver jumped by dollars per ounce, the technical funds might have curtailed their buying temporarily, but they were more than content to buy what they did on the small increase in price (otherwise, they wouldn’t have bought the incredibly large quantities they did buy).
Therefore, the real price and positioning takeaway is not why the technical funds’ buying had such a tepid impact on price, but why in the world would the counterparty sellers sell to the funds in such enormous quantities at such low prices, when it would have been a snap to step back a bit and let prices run higher before selling? There is only one answer to that question and it revolves around an intentional effort to prevent silver prices from rising.
The sellers to the technical fund silver buyers are largely, or exclusively, banks adding to paper short positions and not legitimate hedgers like mining companies. Worse, the concentrated nature of the short selling points to the selling as being manipulative in and of itself.
The bottom line is the silver short sellers sold at much lower prices than they could have sold at and that’s why silver struggled to move higher in the face of the record technical fund buying. Either these manipulative short sellers are extremely confident that they will be able to rig prices lower and induce resultant technical fund selling, or they are desperate to ensure higher silver prices don’t trip off even more buying. The most outstanding price feature in silver over the past two weeks was the aggression of the short sellers. And it’s hard to come up with a more manipulative act.
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