Fifteen years ago I was telling whoever would listen that the price of silver and gold was being manipulated in order to cap any rise in the price of the metals. Literally, no one believed me and I was often referred to as a nut. These past several years have vindicated my hypothesis. Last week, the head of the CFTC, Mr. Bart Chilton, announced publicly that I was correct and that the price of silver has been illegally manipulated. Mr. Chilton admitted,
“I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.
The Wall Street Reform and Consumer Protection Act, which I strongly supported, contains new manipulation provisions as well as antidisruptive trading rules. These new authorities, along with the implementation of thoughtful position limits in metals will go a long way toward ensuring more efficient and effective metals markets devoid of fraud, abuse, and manipulation.
Thoughtful investigations take time. The CFTC staff has worked extremely hard on the silver investigation. That said, there is a point at which it is our responsibility to say something. Within the law, I have done so. I am hopeful that the agency will speak publicly about the investigation in the very near future and when they do so that it will be in a more granular fashion than I am permitted from doing at this time.”
This revelation will have a major impact on the price of silver in the future. The fraud, abuse and manipulation Mr. Chilton refers to will have to be unwound soon. How long is anybody’s guess. Here is what we do know as fact:
1. FACT – There are (4) bullion banks that have a net short silver position on COMEX of 290.8 million ozs. or nearly a year’s worth of production.
2. FACT – Two of the four large banks, JP Morgan and HSBC are administrators to the largest Precious Metals ETF’s.
3. FACT – No one knows for sure how much Silver these two banks hold in their unallocated accounts or where the silver might be stored. There is no auditing of the metal.
Finally, the story about Chilton’s admission spread around the world in spite of the financial media virtually ignoring it. However, the story just became a lot harder to ignore. Indeed, just a few hours after the announcement, a lawsuit complaining of silver price manipulation by J.P. Morgan Chase & Co. and HSBC was filed in U.S. District Court for the Southern District of New York.
But let’s fantasize for a second about a real possibility. If the Plaintiff is allowed enough leeway for discovery AND the plaintiff AND its law firm decide to do the right thing and take this case to its limits: this suit could ultimately reveal the extent to which JPM/HSBC actually have real physical silver/gold with which to back up and deliver if they were ever called on by the big long positions in the futures market. It could further lead to real discovery about the true extent of the paper short in gold/silver that we know exists in NY and London vs. the available of deliverable, unemcumbered bullion. I think we all know the answer to that issue, but knowing the truth and getting the legal door opened to prove it in a corrupted court system are two entirely different matters.
Let’s hope this suit is ultimately about Truth, Liberty and the pursuit of Justice and not just about a bulldog NY law firm with political connections taking on a lay-up lawsuit in order to extract a big financial settlement.
Yes, fellow goldbugs, the fraud is beginning to unravel. Throughout this process, the prices of gold and silver will increase on a scale you can’t even imagine right now.