The weekly COTs are a summation of the "long" and "short" positions held by traders (chart below). Each contract represents a 5,000 oz. paper contract to buy or sell silver. The "longs" on this chart are in blue and light yellow while the "commercials" are the maroon bars. Both are scaled left. The trending green line is the number of "open interest" contracts - scale right. As you can see the "commercials" have never gone long and this has persisted for many years. At each pivotal point the large and small specs (blue & yellow bars) have been crunched. These repeating events have been explained by the fact that the commercials' (only about 5 large players) offers to "sell" silver are only paper, and of that they are without limit. Now, with the "longs" being discouraged, one can graphically see that neither faction has gone to such extremes in a year! But, now you can just begin to see this past week that the shorts (commercials) are beginning to increase once again their offers to sell silver while the longs (large & small specs) have timidly started to buy again.
The simple summation is that the commercials without any limits imposed by the CFTC are able to offer 'paper silver' without limit. They will add to their short contracts all the way up in a silver rally, and then pile on unmercifully making money had-over-fist all the way down. The scam is similar to that used on the Hunt brothers in 1980. As long as only 2-3% is demanded for delivery each month, the long speculators' "goose is cooked" each month. Paper silver is the tail wagging the physical dog. Currently there is only cursory SEC or CFTC oversight, a wink and a nod is about it; and virtually none by congress.
Now, then the way Barclay's woes could play into this scenario is this. IF they are indeed without fully paid-up custodial silver to back their SLV, and have but 47 million ounces when their outstanding SLV obligations are 150 million or so, then, yup, you're ahead of me - they're short 100 million ounces. Knowing that all the SLV trades are settled in cash, and not silver, has enabled them to function as a "fractional reserve banker". Fractional reserve banking is one of the dishonest financial elements that as President, Ron Paul would disallow. In closing then, we could see a "run" on physical silver, the price going to wherever nobody knows.
This is but a layman's interpretive understanding. There are many far more sophisticated minds than mine going over these COT numbers each week with a fine tooth comb. SilverSeek is one of them which issues a weekly report. Ted Butler is another that furnishes excellent silver insight.
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