Reader Asks, “What’s So Hard About Busting COMEX?”

Scott's Soapbox

Here’s a good question from a reader, “Mike“:

I have been following your website for some time along with Sinclair and enumerable others. I think you do a great job and I find your musings incredibly infromative. I’ve never traded futures on the comex but this whole comex cracking/failure to deliver thing puzzles me a great deal.

As best I can tell, if someone wanted to bust the comex couldn’t they just go long an unlimited amount of futures and then just ask for delivery?

The total dollar amount of all registered comex inventory is only about $3B which for many wealthy oligarchs, sovereign wealth funds, or potentially hostile countries is but a drop in the bucket. Is there something I’m missing here?

People seem to get excited about the comex potentially failing and it very well could but it seems that it wouldn’t be very difficult if anyone really wanted to. Again, perhaps I’m oversimplifying but I think getting a clear understanding is very important so people aren’t mislead in their understanding of the process and in any investment decisions regarding the precious metals skyrocketing if and when the comex collapses.

By the way, I am incredibly bullish on both monetary metals and am a firm believer in abolishing the fed, a return to sound money, etc., etc. etc. I’d love to hear your thoughts on this issue when you have a moment as it would probably be educational for me and many other of your readers.

Thanks so much and keep up the great work,

watermelons smashed 120x84Mike, here’s my take on it FWIW:

I agree, theoretically it shouldn’t be all that hard to crack COMEX open like a ripe melon. Like you say, it’s a relatively small market.

How small? As of yesterday, June 3, 2009, COMEX reported a total silver inventory of 120,879,235 oz. So, 121 million ounces at $15.92/oz works out to $1.9 billion.

[/begin conspiracy rant]
Chump change when the “govmint” is throwing around trillions. Geez, remember how the “govmint” gave JPMorgan $30 billion for taking over failing Bear Stearns? Monday, March 17, 2008 was the FIRST business day JPMorgan assumed and expanded Bear Stearns’ COMEX silver manipulation. [link] JP Morgan is almost solely responsible for the COMEX silver manipulation, and they’re funding it with money given to them by your “govmint”.

Oh, BTW, do you remember when silver hit its recent 28+ year high?

Monday, March 17, 2008,  you say, the EXACT SAME DAY JPMorgan took over the COMEX silver manipulation from Bear Stearns? What a coincidence…the price has been beaten down visciously ever since.
[/end conspiracy rant]

So, yes, if you know someone who’s pro-freedom and anti-bankster with a spare $2 billion* they’d have a shot at getting it done.

But normally there’s a problem with doing something like this. You can’t just go out and BUY long futures contracts: there has to be someone else willing to take the other side and SELL short. The COT report (Commitment of Traders) tells us how much JP Morgan’s willing to bet on shorts: right now it sits at 235 million oz.

prince-charming-v2smYes, you read right. JPMorgan is short DOUBLE the entire COMEX silver stockpile. Guess it won’t be hard to find someone to take the other side of your long bet!

BUT WAIT! YES! Now you’re catching on! The very fact that there’s 235 million ounces SHORTED out there right now means SOMEONE(S) ALREADY MADE THE LONG BET as well.

Are you getting this? While you (and any normal, rational human who can fog a mirror) would think all you’d have to do to bust COMEX is make a long bet for the ENTIRE COMEX inventory, you’d be wrong. It’s been tried before AND IT’S BEING TRIED RIGHT NOW. But JPMorgan just keeps making a bigger SHORT bet.

How can they do that?

Ever play poker? Say you’ve got more chips than everyone else at the table. What the hey, let’s make that more than everyone else COMBINED at the table. Let’s also pretend you’re arrogant and cocky ‘cuz your rich uncle is standing behind you, ready to replenish your supply of chips. And, boy oh boy, is he loaded. (We’ll call him your good ol’ Uncle Sam.)

What happens when you’re dealt a crappy hand? Fold?


Bluff your way to a winning hand, up the ante, RAISE, RAISE, RAISE. As long as you can outspend ’em all you got a shot at the pot.

bad poker handYou see, Mike, JPMorgan knows silver is going north like Santa on Dec 26th. Their silver hand absolutely sucks. But, our “govmint” gave ’em a $30 billion grubstake to keep a lid on silver. As long as silver is down, the dollar looks solid and the sheeple won’t panic. [See: JPMorgan Is Fed’s Fair-Haired Golden Boy]

And, so far, JPMorgan knows everyone holding a long position is NOT paid up; they’re LEVERAGED. If JPM can knock silver down a buck the longs’ll get whacked with a big margin call. If they can’t cover, they lose. When the whacked longs lose, their emergency exit pushes the silver price down some more. That causes more margin calls for the longs, pushing the price further down, et cetera, et cetera, et cetera, ad nauseum.

So far the longs (“us” not “U.S.”) have lost each time. But let me ask you this: can a guy win a poker championship with nothin’ but bad hands and solid bluffing?

Would you bet your retirement, your country, your currency, your very physical safety on the guy NEVER having his bluff called and winning EVERY time?

I, for one, want a place at the table when his luck runs out. That’s why I don’t trade my silver, why I have only bought silver since 2005, and why I never sell. I have all the silver I ever bought, except for that which I’ve given away to help people [If You Have No Silver I’ll Give You Some of Mine].

* So, can a guy step in and bust COMEX for $2 billion? Hmmm, sure, futures are leveraged so maybe you could do it for less. In an honest market (#snicker#) 1/10th of $2 billion oughta do it. BUT JPMorgan’s used those nasty margin calls to flush out the longs before. Guess you’d better have the full $2 billion to do it.

But wait! It ain’t enough to bet the entire COMEX stockpile long. Remember, JPMorgan’s betting DOUBLE the entire stockpile. If you wanna call ’em I guess you better pony up about $4 billion.

But wait, again! Who says JPMorgan won’t short even more? How MUCH could they short? $8 billion? $16 billion? Gee, wouldn’t the CFTC step in at some point and declare a manipulative short position and stop the madness?


[/begin conspiracy rant]
You see, the chairman of the CFTC sits on the president’s Plunge Protection Team [link]. He’s automatically in on the manipulation. If it makes him squeemish heading up a dishonest, deceptive “watchdog” organization he can just quit. Oh wait a minute. It does look like turnover’s been a problem at the CFTC Chairman position:
2005: Sharon Brown-Hruska
2006: Reuben Jeffery III
2007: Walt Lukken
2009: Michael V. Dunn
2009: Gary Gensler

Hmmm, maybe they do have a conscience. At least a small, easy-to-kick-around, Jiminy Cricket one.
[/end conspiracy rant]

So, NO, the crooked CFTC won’t stop JPMorgan’s silver manipulation, you see, because they’re backing it. So, if you’re going to bust COMEX you’d better have enough multi-billions on hand to call JPMorgan’s bluff. And, you’re not just going up against JPMorgan, but the guy who’s bankrolling them: dear ol’ Uncle Sam.

Maybe it’d be easier to replace CFTC leadership with an honest guy. Maybe you’d also have to replace at least 51 Senators. Maybe throw in 222 Congressman (you can keep Ron Paul, maybe Dennis Kucinich.)

Or, maybe you just wait for the US dollar to finally collapse. Once there’s no dollar to protect, there may be no reason to keep a lid on gold and silver. Actually, now that I think about it, since the Shadow Powers want a dollar collapse anyways (to cripple the U.S. and make way for greater global gov’t) maybe they already plan to trigger it by abruptly stopping the manipulation.

USDX 2009-06-04

Hmmm… maybe the dollar dive has already started…

Have you noticed how nervous the Chinese have gotten in the past few weeks? How Brazil no longer uses the dollar for trade. How Russia now prices oil in rubles not dollars? How the Chinese laughed at Treasury Secretary Geithner last week when he said “the dollar’s strong.” [ Read Why The Chinese Laughed At Geithner by former Assistant Secretary of the Treasury Paul Roberts.]

And, finally, the last time COMEX had manipulated the silver price below its cost of production a couple brothers from Texas tried their hand at busting COMEX by going long on silver and preparing to TAKE PHYSICAL DELIVERY of 192 million ounces. What happened? The CFTC crooks villified them.

The Hunts shook the lying bankers to their boots – to the point where intervention by the Fed, Treasury, and the Defense Department were warranted – merely by asking for delivery of the 192 million ounces of silver they’d been promised. This was not a “cornering” of a market; it was the attempt to enforce a contract, same as you’ve got with your landlord or bank.

Read “The Hunts Tried to Corner the Silver Market” Myth.

Please protect yourself and your family. Don’t cash in your (gold and silver) insurance!


COMEX Crimes: Your Tax $ at Work
JPMorgan Is Fed’s Fair-Haired Golden Boy


Gold/Silver Manipulation Over in 30 Days?

If you’ve been a precious metals investor for more than six months you’ve heard about the rampant price manipulation on COMEX. (COMEX sets the cash price for gold and silver through its daily futures and options trading activity.)

Many of us have been waiting for the illegal manipulation (run primarily by Bear Stearns until March 2008, then JPMorgan Chase since then) to end for over two years.

Adrian Douglas thinks it may be over in as little as 30 days.

At he writes (edited for length, link):


In November 2005 when gold was trading about $450 I predicted the mega-move in gold up to $720/oz by noticing a very large build-up of call options in the HUI component shares. [link]

In August 2007 I identified a massive Gold call option build-up in the COMEX DEC 2007 contract and predicted a big gold move. [link] Gold was trading at $660/oz at the time and ran up to over $1000/oz by March 2008.

It just recently came to my attention from two different confidential sources that JPMorgan and Goldman Sachs have been buying large amounts of Calls in gold and silver. This made me put on my gumshoes and take a serious poke around the COMEX option open interest once again.

Figure 1 shows the cumulative Open Interest across all strike prices for the COMEX Gold Call positions and the Put positions for the JUN 09 options.

Figure 1

The ratio of Calls to Puts is 1.81 so Bulls outnumber Bears dramatically. What is also remarkable is the amount of open interest. For example, 100,000 contracts would be in-the-money if the gold price runs to $1,250/oz in the next 30 days. This is an astounding amount of option OI considering the open interest in all the futures contracts stands at only 345,000 contracts!

Let’s take a look at Figure 2 which is for DEC 2009.

Figure 2

The bets by bulls outnumber those by the bears by a 2.3 to 1 ratio which is even more bullish than for JUN 2009. The Total Call option interest is 113,663 contracts which is very similar to JUN 09. Furthermore if gold is trading at around $1600 by DEC then 100,000 contracts will be in the money!

I consider option players highly sophisticated speculators.
Such large bets are likely being made by some large money interests who are buying out of the money options BEFORE going into the futures market. Buying long futures in large volumes will rapidly drive up the gold price but the massive open interest in the Call Options then allow access to much more futures contracts at the same price by exercising the options and then perhaps taking delivery of the gold. This is bolstered by sources revealing that JPM and GS are buying in quantity. So on the part of JPM this is likely a ploy to try to cover a chunk of their massive short position.

Let’s now look at silver.
Figure 3 shows the cumulative Open Interest across all strike prices for the COMEX Silver Call positions and the Put positions for the JUL 09 options. The ratio of Calls to Puts is 1.80 so Bulls outnumber Bears by 80%. What is also remarkable is the amount of open interest. For example, 18,800 contracts would be in-the-money if the silver price runs to $25/oz in the next 60 days. This is an extraordinary amount of option OI considering the open interest in all the futures contracts stands at only 94,000 contracts!

Figure 3

Figure 4 shows the cumulative Open Interest across all strike prices for the COMEX Silver Call positions and the Put positions for the DEC 09 options. The ratio of Calls to Puts is 1.68 so Bulls outnumber Bears by 68%. Again the total Open Interest in Calls is high at almost 25,000 contracts when the Open Interest in all futures currently stands at 94,000 contracts.

Figure 4

I conclude that smart money is being placed for a massive rise in the gold price in the next 30 days and silver in the next 60 days (which probably means within 30 days for both metals) and again by December.

Only sophisticated traders tend to be in the precious metals option market so when there is a huge build up betting on a particular direction that is typically a directional indicator as I have shown was the case for the last two big moves in the precious metal bull.

The flat contango in gold and silver suggests there is a shortage developing of precious metals for delivery. We know that two large banks hold almost 100% of the commercial net short position. They need desperately to cover their exposure if the market is about to make a big move.

It looks as if that is precisely what is happening.

Adrian Douglas
April 29, 2009

COMEX Crimes: Your Tax $ at Work

tedbutler_smCheck out Ted Butler’s (one of my heroes) latest column. He asks some great questions… (I’ve edited together some excerpts below.)

BTW: Notice how you can never buy silver or gold at the spot price anymore? It’s always at least 15% above spot price IF you can find it?

Remember this: before March 2008 (when the events described below happened) silver was easy to get and you paid just 18 cents or so over spot. Now the US Mint is rationing gold and silver Eagles, they’ve halted production of fractional Gold Eagles, and silver & gold carry delivery lead-times measured in weeks or months. You can thank the government’s PPT (Plunge Protection Team) for this mess.

Q: How did we get to the point where a big U.S. bank, most likely JP Morgan Chase, has come to manipulate the silver (and gold) market?

Q: Why are U.S. banks allowed to speculate in commodity markets at all, when they have caused such havoc already with their failed trading in just about everything they touched?

Q: Didn’t they do enough damage with subprime mortgages and credit default swaps?

Q: Why should taxpayers subsidize bank commodity speculation and manipulation?

Q: When did the regulators stop enforcing the law and switch over to defending the criminal element?

Dead Bodies
As bad as the lack of justice for past misdeeds is to the public psyche, there is something even worse: regulators ignoring an obvious crime in progress, especially when the evidence of that crime is readily available and published by the regulator [CFTC] itself.

The CFTC is on their third silver investigation within five years, while at the same time reporting that the short concentration has grown to the highest level in that time. This is akin to tripping over and not seeing the dead body in a murder investigation.

The Crime: In Progress Now
market-riggingAs I write this article, the big short(s) is attempting to rig the silver and gold markets lower to trip off technical fund selling below the 50 day moving averages. Will that attempt succeed? I don’t know. What I do know is that this is market rigging of the highest order. I also know that the big short is becoming increasingly isolated and more learn of the manipulation daily. That’s good for us, bad for them.

In the case of silver, while the manipulation has been ongoing for many years, the criminality kicked into high gear when JP Morgan took over Bear Stearns, at the government’s request, last March [2008].

Who Started the Crime?
Bear Stearns was the holder of the large concentrated short silver position and it was inherited by Morgan. In JP Morgan’s defense, it does not appear they initiated the concentrated silver short position. It was excess baggage from the forced takeover of Bear.

The Treasury Department and Federal Reserve backstopped Morgan and agreed to hold them harmless for financial losses and for criminal involvement in the silver manipulation. The financial system was weak enough at the time of Bear Stearns’ failure, that a blowup in silver had to be avoided. JP Morgan was given the go-ahead to “manage” and control Bear Stearns’ silver short position directly by the Treasury.

JP Morgan: Above the Law
prince-charming-v2smWhile it is understandable that JP Morgan would accept the Treasury Department’s request, and that the avoidance of a potential financial panic is always a good thing, panics are short-term events. A year has now passed, and the manipulation is still in force, stronger than ever.

What started as a temporary remedy for a short-term emergency, has evolved into a continuance of the long-term silver manipulation. This is wrong on every level. The U.S. is a nation governed by the rule of law. No one is above the law. Not the Treasury Department, not JP Morgan, not the CFTC. If my findings are accurate, then the passage of time indicates that there is potential real criminality here.

Why Does the CFTC Look the Other Way?
As far as the CFTC, it is a weak agency, incapable of over-ruling a directive from the Treasury Department. They had no choice but to allow the silver market to continue to be manipulated by allowing the transfer of the concentrated short position from Bear Stearns to JP Morgan.

Besides, the CFTC already dropped the ball by allowing the concentrated short position to come into existence at Bear Stearns in the first place and denying for years that the silver manipulation existed. They had no choice but to go along. They couldn’t stand up to Treasury if they wanted to. [Editor’s note: the CFTC is actually a member of the Plunge Protection Team (created by Executive Order # 12631) whose stated purpose is to manipulate markets. [link] See also Bailout Charade: The Hidden Reason Why]

Will It Ever End?
So how does this end, or can JP Morgan, Treasury and the CFTC allow this crime to continue indefinitely? No one has a lock on the future, but there is no easy way out for them. This cannot be resolved quietly or orderly, but it must and will be resolved.

Even if the manipulators don’t blink first, the growing shortages in the wholesale physical market will bring this scam to a head. That’s why you must own silver. [more]

JPMorgan Is Fed’s Fair-Haired Golden Boy
“Federal Reserve”: NO On Both Claims
CFTC to Investigate Silver Manipulation

“The Hunts Tried to Corner the Silver Market” Myth
Bailout Charade: The Hidden Reason Why

This Guy Plans 2 Kill “Paper” Silver

Bob Coleman, a physical gold and silver bullion fund manager in Idaho, says he’s ready to take on COMEX and break the back of “paper” silver. He has sent legal notice to the CME/COMEX and CFTC (the regulators overseeing COMEX trading) warning them of his intention to take physical delivery of  between 1 million and 5 million ounces of silver per month.

His letter, in part. (Click it to read more.)

Bob talks about his intentions, “Our programs are determined to follow the rules of the exchange and take physical delivery of their inventory for as long as possible. The structure of our programs and vaulting facilities are very unique and have been designed to fully insure and segregate all physical precious metals. The storage is independent from the financial and bullion dealer system. We specialize in providing private storing, safeguarding, and viewing of your assets. We have made arrangements with armored transportation carriers to pick up, transport, and store the metal to many of our available vaults.”

If Bob follows through, and you and I should hope he does, his actions could finally break COMEX’s back and stop the illegal manipulation of the silver market. If industrial users of silver are unable to “get physical” expect the price to explode as they scramble to meet their needs.

My aside: It is no secret that the “paper” price of silver and the “physical” price of silver no longer match up. COMEX has “paper” silver pegged at $9.36/oz as I write this, but it is impossible to purchase “physical” silver at this price. eBay has become a more accurate indicator of silver’s true price. (Click the image to get a list of the most recent sale prices of Englehard & Johnson Matthey 100 oz bars on eBay.) Current eBay pricing is running $13.01/oz to $14.92/oz.

Let Bob know you support his efforts! Contact him at 208-468-3600 or at
Go, Bob, go!

Let’s join Jim Sinclair and Bob Coleman and BUST COMEX gold and silver!

Vaporize COMEX CountDOWN

Sinclair Sez “Help Me Bust Comex”
Attack of COMEX Gold & Silver
Warning: COMEX May Default on December Gold
How 2 Track COMEX Deliveries
Gold: Is This It, NOW?

◊◊◊◊ Now: Gold @ $733.10, Silver @ $9.36, USDX @ 86.37 ◊◊◊◊
◊◊◊◊ Now: DJIA 8,378.95

CFTC to Investigate Silver Manipulation

This from the Wall Street Journal:

With silver prices falling this past summer, silver bugs world-wide set out to prove that their metal was in short supply and market manipulation was at work. They bombarded federal regulators with hundreds of emails crying foul play and demanded answers.

Though such pleas proved futile in the past, this time the rousing chorus grabbed regulators’ attention. On Wednesday, the Commodity Futures Trading Commission confirmed that there’s an investigation into the silver market.

“We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it,” said Stephen Obie, acting director of the agency’s division of enforcement.

Silver investors have argued that a handful of U.S. banks have been controlling a large portion of silver’s short positions — or bets that prices will decline — on Comex division of the New York Mercantile Exchange. Official data from the CFTC showed that two U.S. banks had increased short positions in the silver futures market between July and August by 450% and controlled 25% of the total open interest.

“The proof that this selloff was criminal lies in public data,” wrote Theodore Butler of Cape Elizabeth, Maine, in August in a silver newsletter. “The concentrated sale of such quantities in such a short time” caused silver’s fall, wrote Mr. Butler, who for many years has been vocal about purported silver-market manipulation. In September he reiterated to readers that they should email the CFTC.

Update 11/4/2008: Ted Butler has commented that he doubts this investigation will bear fruit. He says no investigation is needed; all the CFTC has to do is look at their own public reports to see evidence of manipulation.

And then I discovered this startling nugget of info: guess who’s on the President’s “Plunge Protection Team”–the very same team that’s behind the bank(s) that are used to manipulate the markets?

Here’s the PPT member list from Wikipedia:
PPT Exposed
See that last entry? The Chairman of the CFTC is part of the manipulation team. DUH! Guess this “investigation” is “being handled.” Yep, **now** you’re getting an idea of how corrupt the system is!

Let’s join Jim Sinclair and Bob Coleman and BUST COMEX gold and silver!
Sinclair Sez “Help Me Bust Comex”
This Guy Plans 2 Kill “Paper” Silver
Warning: COMEX May Default on December Gold
◊◊◊◊ Now: Gold @ $876.00, Silver @ $13.22, USDX @ 77.48 ◊◊◊◊
◊◊◊◊ Now: DJIA 11,143.13

Butler: “Silver Blowback”

Ted Butler’s latest article is a good read. Excerpt:

Blow Back

We have actual retail silver shortages and prospective industrial shortages for one reason – the price is too low. The very last thing that will remedy a shortage is lower prices. Sharply lower silver prices will only induce further shortage. It is, quite literally, like throwing gasoline on a fire. It is only a matter of time before the new lower prices stimulate more demand, both for investment and user inventory further restricting supply. This is the essence of the law of supply and demand.

The urgent rush by the manipulators to liquidate every margined long by rigging lower prices, must be done before those lower prices activate the new physical demand and curtail physical supply. There is a blow back phenomenon at work here – at some point the artificial low prices will trigger a price explosion.

Take heart, my friends. The current smashing of the silver market is a pressure cooker. The fully-paid physical 100 oz bars you have tucked away guarantees you are already positioned to ride the rocket to the top.

I believe the countdown has started. If seconds were months I think we’re at
“t minus 5…”

◊◊◊◊ Now: Gold @ $780.70, Silver @ $11.50, USDX @ 79.45 ◊◊◊◊
◊◊◊◊ Now: DJIA 11,230.73

Who Killed Silver? The Smoking Gun

The biggest question in recent weeks has been “Who killed silver?” Who was responsible for the 38% price drop in silver? Our hero, Ted Butler, looked at the COT report just out and has revealed the answer in his latest column.


For years, the data contained in the weekly Commitment of Traders Report (COT), issued by the CFTC, have indicated that several large COMEX traders have manipulated the price of silver and gold. For an equal number of years, the CFTC has reluctantly responded to public pressure over this issue with blanket denials of any wrongdoing.

The recent widespread shortage of silver for retail purchase coupled with a price collapse appears to have shaken these analysts’ confidence that the COMEX silver market is operating ‘fair and square.’

For any remaining doubters that COMEX silver and gold pricing is manipulated, the following CFTC data should be considered. This data is taken from a monthly report issued by the CFTC, called the Bank Participation Report.

Here are the facts.
As of July 1, 2008, two U.S. banks were short 30,995,000 ounces.
As of August 5, 2008, two U.S. banks were short 169,025,000 ounces, an increase of more than five-fold.

This is the largest such position by U.S. banks I can find in the data, ever.

Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.

Is there a connectionbetween 2 U.S. banks selling an additional 138 million ounces in a month, followed shortly thereafter by a severe decline in the price of silver? That’s equal to 20% of annual world mine production or the entire COMEX warehouse stockpile, the second largest inventory in the world. How could the concentrated sale of such quantities in such a short time not influence the price?

What real legitimate business do 2 U.S. banks suddenly have for selling short such quantities of speculative instruments over a brief time period? Do we want banks to be engaging in this type of activity? If the manipulation was not successful, would U.S. taxpayers be called on to bail out yet another bank speculation gone bad?

Do the traders who lost money in the recent price collapse of silver have a reason to believe that their money is now in the pockets of these two or three U.S. banks? If so, do they have recourse?

The data in the Bank Participation report is so clear and compelling that it is hard to conclude anything but manipulation. It is beyond credulity to conclude other than two or three banks caused one of the most severe price collapses in precious metals history. The CFTC has a lot to answer for as the regulatory agency responsible for preventing this type of blatant manipulation.

No, the CFTC will NOT name the two banks in question.

◊◊◊◊ Now: Gold @ $827.40, Silver @ $13.48, USDX @ 76.75 ◊◊◊◊
◊◊◊◊ Now: DJIA 11,598.10