Forget about “give me a break”, it seems like you can’t even buy a break with precious metals this past week. The metals still trended down as I suspected they would and even went a little lower than my down side possibility with gold. The recent activity around precious metals and the quick draw down days where the metals get hit hard does reek of manipulation and intervention. I have been asked many times in the past about manipulation in precious metals and the price action we see around key price levels. I feel most markets are manipulated in one way or another and precious metals are no different.
In fact silver is probably the most manipulated market in the world, I really can’t think of any other market that is so easily manipulated. In a market that has approximately 30 million ounces of silver in warehouses available for delivery, there are days such as Feb. 29 where you can have 255M traded in hours (the total for the day was estimated at over 500M oz. traded). Such a concentration of positions by a few key players can and will move price to a key level, at which point computer trading can further extend the move which is what most likely happened on Feb. 29th of this year. Here is some information and perspective on how much silver was sold in the paper market during that one day:
- One Comex contract for silver is for 5,000 ounces.
- Average inventory of silver available for delivery is 30M ounces.
- Silver production for the year is about 800M ounces a year.
- Supposedly more than 45 thousand contracts traded on Feb. 29 or about 255M ounces.
- In a matter of hours, paper silver sold 8.5 times more than inventory available for sale.
So do I believe that the silver market is manipulated?
When you have such a concentration of selling on one side by a few sources, unlimited amounts of funds and knowledge of sell trigger points, any market could easily be manipulated. On that day alone, you had paper pushers selling almost one third of a year’s production in a matter of hours. This selling was done by a few commercial firms that are known to have the highest short concentrated position of any market. Common sense tells me price manipulation is possible when you can sell endless amounts of paper silver in a matter of hours. A price drop of several dollars is easily achievable once stop loss triggers get taken out to the downside. When you have a paper market which has no real bearing on the physical market or accountability for delivery, then anything is possible in terms of price.
So my answer is yes, the silver market can easily be manipulated and most likely is, unfortunately there is no way that we can prove it.
I am not the only one to think so; you may want to listen to some great audio interviews on Financial Sense about silver manipulation. Jim Puplava interviews Ted Butler, David Morgan and Eric Sprott about their views regarding the silver market manipulation and getting their response to CFTC’s Commissioner Bart Chilton’s take on the silver market. Even a commissioner from the CFTC believes that manipulation is possible, but no one is doing anything about regulating position limits in the silver market. It seems like the concentration of silver shorts by a few commercials will be overlooked again and the regulators will not get involved in enforcing the rules on position limits by the shorts. So if there was manipulation, the regulators are not doing their job in creating an equal and transparent market, they are allowing the manipulation to happen.
Here’s the irony I find in the whole situation about manipulation and involvement by regulators. They are currently overlooking this manipulation in the silver market as long as it’s on the short side and is done by their paymasters, the bankers. Back in the 1970s, the Hunt brothers wanted to protect their wealth and decided to take delivery of as much silver (real money) as possible. At the time, the regulators decided that the brothers were manipulating the silver market to the upside and forced them out of their long side contracts which stood for delivery by changing the rules and not allowing delivery of the physical. Here is a great video on YouTube called SBSS 15 The Real Hunt Story Part 1, which tells the story on why the Hunt brothers wanted to protect their wealth using silver. Now that the silver manipulation is on the short side by bankers and government, everything is overlooked and will not be regulated. Unfortunately this is the market we are dealing with so when it comes to paper silver trading, the paper pushers will get their way and always profit at someone else’s loss.