The following paragraphs are taken from an article by John Embry in Investors Digest.
"In the past, I have alluded to the fact that I may be even more bullish on silver than gold in the near future.
There are many reasons for this, including an imbalance between sustainable demand and mine production and scrap supply, rapidly shrinking above-ground inventories, new uses for silver in the medical and industrial fiellds, the introduction of silver ETF's which greatly increase the demand for silver, and the existence of a remarkable short position on the Comex.
Ted Butler, to whom I have referred to before, and who, in my estimation, has done remarkable work on the silver market, has looked extensively into this COMEX short position and is totally appalled.
Essentially, a group of 4 or less large traders on the COMEX are short more than 250 million ounces, representing nearly 150 days of world wide production- a a figure that dwarfs the relative short position in any other commodity.
The argument that the short position is immaterial because for every long there is a short is totally dismissed by Butler. He argues that, in this instance it would appear as if the short position, given its size and more importantly, its concentration, exists primarily for the purposes of manipulation.
I strongly suspect that Butler is on the right track here, but given the bullish fundamentals for silver, I believe the short position will turn out to be a major positive because the short in a rising market becomes a motivated buyer. If gold approaches its all-time highs as the year unfolds, I have no problemenvisioning silver trading in excess of $20 per ounce."