While gold fell marginally yesterday (down 30 cents) on dollar strength, silver rose by over 1% (by 28 cents to $23.81/oz) after a CFTC commissioner alleged that major silver market participants were involved in manipulation and suppressing the silver price. Overnight and this morning there has been weakness in equity markets internationally and in commodity markets with suggestions that risk aversion may have picked up ahead of the FOMC decision next Wednesday.
Gold is currently trading at $1,333.74/oz, EUR963.96/oz, lb841.80/oz.
Gold (orange), Silver (yellow) and Gold/ Silver Ratio (white) - 40 Years. Click on the image to view full size
Silver looks very well technically and continues to play catch up with gold which has already risen by more than 50% over its 1980 nominal high of $850/oz (see chart above). The gold to silver ratio has fallen below 57 (56.3 - 1332/23.68) with 55 and 50 looking potential targets in the coming months. Throughout history the gold/silver ratio has been close to 15 and the average in the 20th century has been around 45. The relative undervaluation of silver to gold and the fact that it remains less than half of its (nominal) record price in 1980 is leading to strong demand for poor man's gold internationally and in Asia particularly.
Silver is currently trading at $23.73/oz, EUR17.16/oz and lb14.98/oz.
Silver - 40 Years (Weekly). Click on image to view full size.
The US commodity futures regulator is looking into claims by a former JP Morgan trader in London that JPMorgan Chase was involved in manipulative silver trading, The Wall Street Journal reports, citing a person close to the situation. Reuters reports that in recent months, Commodity Futures Trading Commission (CFTC) lawyers have interviewed employees of JPMorgan in its metals trading business, the newspaper said. Along with JPMorgan, CFTC lawyers have also interviewed industry traders, commodity executives, experts and employees of other metals trading firms, the Journal said. Ray Bashford, a spokesman for JPMorgan in Hong Kong, said the bank had no comment when contacted by Bloomberg News today.
It is hard to know how important are the comments by Bart Chilton, the CFTC commissioner, with regard to the ongoing silver manipulation allegations.
They suggest that he himself agrees with the Gold Anti-Trust Action Committee (GATA) allegations that silver prices are manipulated. If the CFTC prosecutes those who may have manipulated gold and silver markets (as Chilton urged) and violated commodities laws then it could lead to further volatility and higher prices. This would especially be the case if the large concentrated short positions on the Comex, held by banks such as JP Morgan, were forced to cover their positions.
This may lead to a short squeeze that could propel silver above $30 and towards its nominal high of $50/oz in the coming months.
Platinum Group Metals
Platinum is trading at $1,693.75/oz, palladium is at $623/oz and rhodium is at $2,225/oz.
Mark O'Byrne is managing director of Ireland-based GoldCore.