Assuming the Cartel is working to push down the spot price of silver, they would do so by dumping paper shorts. These contracts are probably for the front month, which would not have to be settled immediately and therefore would NOT mean that they must issue a cash premium for settlement. Consider that hundreds of millions of ounces of silver trade every day on the COMEX, and yet only a fraction of that is ever called for delivery. Most of the shorting is probably covered the same day or shortly thereafter, long before the first notice for any contract month. This is what is driving the short term trading.

Over the longer term, there are indeed traders that are buying contracts with the full intention of demanding settlement. And this is what could eventually trigger the default at the COMEX. I have no doubt that there is a potential squeeze underway right now, and a scramble to find silver to deliver for the existing outstanding futures. That may be affecting the price of silver in the spot market. But it is not directly affected by whomever may be shorting the hell out of the front month on any given trading day.

If you are able to dump contracts worth tens of millions of ounces of silver into a thin market, you can trigger spec selling. Stop losses get triggered. Margin calls may be issued. The player that is short can then sit on bids and cover that outstanding short in a day or less, and the spot price is driven lower. And assuming the shorts cover, there is absolutely no impact on the shortage of actual bullion.

The difference in the trading during the last few months has been that specs are less likely to pitch positions on the raids. The open interest is not contracting very much. And when the shorts are piled on, the Cartel is thus not able to easily cover their outstanding obligation soon after. It remains to be seen how this month will play out but do not confuse the raids and shorting that may occur in the next few sessions with any delivery issues that are outstanding today.

cheers!

mike