March 4, 2011
As part of silver week, we have talked about all sorts of factors—supply, demand, futures, backwardation, and even the government’s manipulation of silver. The one critical factor that we didn’t mention is how megabanks have manipulated silver as of late, and the tremendous effect it has had on the market.
While some may think that allegations of cloak-and-dagger manipulation are tin-foil conspiracies, the effect on the market, whether real or just psychological, is undeniable. What once began as whispers being passed along by gold bloggers and forum trolls has exploded to the pages of CNBC, the Financial Times, and even the New York Times.
For years, precious metals analysts have challenged the notion that silver and gold were freely traded markets. Some, like Ted Butler and GATA, challenged the status quo of manipulated markets, while others opportunistically embraced manipulated markets as a chance to buy precious metals at artificially low prices. In any case, the mainstream media ignored these allegations and went on as if nothing had happened.
But that all changed when Andrew McGuire, an experienced metals trader, alerted the CFTC of imminent rigging by several megabanks. The CFTC ignored him, the rigging happened just as he described, and the silver manipulators kept chugging along—making massive profits off unwitting investors.
In October of last year, Bart Chilton, announced that the CFTC was investigating the silver market, which he said “was subject to repeated attempts to influence prices.” It seemed as if the manipulation had been uncovered. In November, the public started gaining awareness as journalists like Max Keiser began informing the masses about the megabanks’ manipulation scheme.
But in the same way that big banks have been able to evade responsibility for the financial crisis, they have thus far been able to shirk responsibility for manipulating silver. As a gestural move, some banks reduced their short positions and closed their proprietary trading desks—but they still have enormous manipulative positions in the silver market, which violate CFTC rules. Yet the CFTC chooses to do nothing.
But the tale is in the tape. Increased awareness has only enhanced investor demand and the slow unraveling of their manipulation schemes have caused banks to diminish their short positions (which reduced their ability to manipulate the price) and thus the price of silver has taken off. The breaking point happened as the investing public realized that the supposed “conspiracy theorists” were spot on in their allegations.
Sadly though, the scheme keeps chugging along. The same megabanks still hold huge positions, and closing their proprietary trading desks won’t prevent them simply moving their scheme off of U.S. shores. It won’t be completely unraveled until a megabank has collapsed and the manipulation scheme has been completely exposed.
There is no question about which direction the cycle is moving. You can try and fight it and get crushed, or you can be opportunistic, and take advantage while things are still in your favor.
This article was posted: Friday, March 4, 2011 at 5:14 am