Ted Butler on Gold And Silver Short Retrenchment; Frantic Warehouse Movements (2012-05-05)

"Remarkably, at least to me, the frantic turnover in metal coming into and out from the COMEX silver warehouses continued this week. In fact, it was one of the most active weeks in memory, even though total inventories remained largely unchanged at 142 million ounces. I can't help but be fascinated by the continued high movements of COMEX silver inventories over the past year. I keep searching for a more plausible explanation than it means tight wholesale physical conditions, but I have been unable to find that explanation. Increasingly, I have the suspicion that some large entity or entities may be acquiring silver in a determined fashion. I can't prove it, but the movements suggest it. Yesterday's 1.5 million oz deposit in the big silver ETF, SLV, leaves it ahead almost a million ounces net deposited for the week. This is very much in contrast to expectations of net withdrawals for the week, given the weak price action and adds to my suspicions of major accumulation."

"The big surprise in[the Commitment of Traders for silver] was the composition of the change among two of the commercial categories. Whereas the big 4 (read JPMorgan) reduced their net short position as much or more than anticipated, the raptors (the smaller commercials apart from the big 4 and the big 5 thru 8) sold 4,700 contracts from their net long position, reducing that net long position to 13,600 contracts. I don't recall the raptors ever selling like this into a notable price decline. It could be that there was some type of reporting error, but an analyst has to take the data as it comes. If there is some type of adjustment in the next COT, I'll deal with it then; for now, I'll consider the numbers as being accurate as reported."

"The big 4 (read JPMorgan) reduced its net short position by 3,500 contracts, one of the largest weekly reductions ever. As a result, the listed percentage of total open interest held net short by the big 4 was, at 26.3%, the lowest in many years, even lower than the extreme lows seen this past December. In terms of the number of contracts held net short by the big 4, while not the lowest number ever, at 29,157 contracts, it is one of the three smallest short positions on record. In simple but accurate terms, the recent takedowns in the price of silver were designed and executed to get this concentrated short position reduced."