The Practice of Rigging Markets – Gold Goliath

Posted on :Jun 08, 2015

Gold is seeing moderate gains on Monday with bargain hunting and short covering in the futures markets. Gold last reported a.m. is $1174.30 and silver is $16.02

According to Lawrence Williams of Mineweb:

There is a continuous debate taking place as to whether the principal precious metals prices are being manipulated by the big money for whatever reasons, or indeed in the case of gold at the instigation of some big Central Banks of which the US Fed is reckoned to be the main culprit. The idea is completely dismissed as complete rubbish by most mainstream gold analysts – indeed most will never mention the possibility. But activist groups like the Gold Anti Trust Action Committee (GATA) have researched, and put forward, some compelling evidence, dating back many years, which does indeed suggest that the monetary establishment has certainly been predisposed towards controlling the gold price as a runaway yellow metal price is seen as a destabilising influence on the global fiat currency system in terms of suggesting a global lack of confidence in paper money.

The jury remains out here – those who believe in gold price manipulation and repression will not be moved from their viewpoints, while the mainstream still looks upon these proponents as representing the lunatic fringe – ‘gold cultists’ was the term used at the recent Bloomberg Precious Metals Forum in London. Be this as it may there is an indication that the ‘cultists’ may be gaining a little ground in that some hitherto reluctant very respectable mainstream media have at least recognised in print that there is a raft of opinion which holds this view, having totally ignored this in the past.

But that is gold – with all the political implications that exist. The depths of government economic policies may be devious and remain well hidden with the ultimate intent of maintaining confidence in the status quo. We continually see this in the form of economic indicator goalposts being moved to present data in a more favourable light, so why not organise surreptitious gold price controls to do the same? Who knows outside the economic establishment itself – and it’s not saying apart from denials of such a policy. But who believes such denials these days at any level of the political process?

So how about silver? This is no longer in itself a monetary metal so there is probably little incentive for governments or central banks to get involved, bar perhaps a feeling that a runaway silver price might drag gold along with it. A veritable case of the tail wagging the dog!

But silver is a tiny market in comparison with gold, which lays it open to speculative manipulation by big money. So in this respect we return to the views of specialist silver analysts – Ted Butler. As we noted in a previous article on Mineweb – There can’t be anyone out there who examines and researches the silver markets like Ted Butler, and some will consider his findings and assumptions, particularly with respect to his theorising on JPMorgan’s undue impact on the silver market, a little over the top. However, he has been delving deeply into the market’s inner workings and pricings for as long as I can remember – at least 30 years – and his views should certainly not be discarded out of hand. 

Butler has long been of the opinion that the COMEX silver futures market, which effectively sets the global silver price regardless of ‘silver fixes’ elsewhere, is hugely manipulated by the big money with futures contracts continually being traded at many, many times physical silver availability. He also questions the enormous levels of silver shorts on COMEX held by the bullion banks – and by JPMorgan in particular. Writing yesterday on the goldseek and silverseek websites, Butler noted, “US Government data unquestionably prove speculators are setting the price of silver on the COMEX to the exclusion of actual silver producers and consumers and that is so far from the intent and spirit of US commodity law as to be inexplicable”.

Where speculation ends and manipulation begins is a moot point, but the sheer volumes involved here, both in futures trades, and enormous short positions – JP Morgan alone is calculated to be short 120 million ounces of silver or more – leads to the belief that it is thus manipulating the silver price downwards to enable it to take delivery of massive amounts of silver at driven-down prices. Butler calculates that the investment bank holds as much as 350 million ounces of silver, mostly on its own account rather than in client accounts.

True, Butler is somewhat obsessed by the silver positions and trading on COMEX, but that has driven his continuing incredibly detailed research into what is actually going on on the prime silver commodity market. He has also been a strong proponent in trying to persuade the silver miners, who are most affected by silver price setting, to officially request the regulator – the Commodity Futures Trading Commission (CFTC) – to investigate what is really taking place. And now, Keith Neumeyer, President and CEO of one of the world’s largest primary silver miners, has stepped up to the plate with a formal request that the CFTC should examine the COMEX trading and short positions which are hugely anomalous with respect to actual silver supply and demand.

“It occurs to me,” Neumeyer says in his letter to the CFTC Chairman, Timothy Massad, “that such massive speculation in COMEX silver futures may not be in keeping with the spirit and intent of commodity law and something is wrong with the price discovery process”.

Neumeyer goes on to suggest that these issues need to be addressed by the CFTC and indeed its responsibility for so doing.

While Butler hopes that Neumeyer’s request will lead to ‘an open and honest debate’ on COMEX price setting processes and at least bring recognition of the vast speculative processes that dominate the COMEX futures markets to a broader audience. However the cynics would also suggest that any investigation by the CFTC, as effectively part of the monetary establishment itself, will be totally inconclusive and the debate on market manipulation and metal price setting for silver will continue to continue!

Butler also hopes that other major silver producers may also petition the CFTC to investigate in detail what is taking place in the markets. Sometimes these investigations do bear fruit as witness the LIBOR and Forex market manipulations exposures of recent months and years. Certainly the big money has the capacity, and indeed the will, to manipulate markets far bigger than that for silver to their own advantage. Such is the pursuit of money in today’s capitalism.

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