Many observers, notably GATA, have characterized the more than decade long run up in the precious metals markets as a managed retreat orchestrated by the big bullion banks.
These banks typically profit by using their large transaction size and deep pockets when the market is vulnerable to induce substantial price variations, often by triggering stop loss orders placed by short term speculators.
Price Suppression More a Reality Than a Theory
Perhaps one of the more popular criticisms of price suppression theories is that if the silver and/or gold markets were so managed in this way by the bullion banks, why have their prices risen so steadily over time?
First of all, this critique is weak because even largest corporate banks would have a hard time holding back the long term flow of investment funds into the precious metals markets. They may be able to trigger short term fluctuations, but the long term trend will overcome those variations.
On the other hand, if the real mover and shaker behind the bullion banks’ notable precious metal selling activities and consistent large short positions is actually a central bank or another official agency suppressing the price in order to prevent rampant inflation due to a devaluing paper currency, then that makes a lot more sense.
Such an entity can print effectively unlimited amounts of dollars to pay for its losses, and it would never be forced to deliver physical metal it did not have because they would generally be trading futures on the short side. Since the seller of a futures contract controls physical delivery, they can simply opt not to deliver and cash settle instead.
Other Financial Scams Exist, so Why Not Price Suppression?
Furthermore, it is interesting to note in the age of the Libor scandal, FASB mark to market rule changes, HFT programs front running retail investors, MF Global’s dramatic demise, and Bernie Madoff’s outrageous Ponzi scheme, that it continues to be taboo to even entertain the idea that the precious metals markets could actually be managed.
Of course, the acceptance of price suppression in silver and gold futures as a reality, or even as a likely possibility, will immediately call into question the real value of every other commodity also denominated in US dollars.
Basically, if inflation can be controlled in this way by manipulating futures markets, this strategy is probably being employed throughout the commodity markets to artificially prop up the intrinsically worthless dollar and manage inflation.