Sunday, January 25, 2009

The gold and silver conspiracy

Last May the CFTC said anyone that postulated that their was a manipulation in silver or gold was a fan of Oliver Stone. Here is their "May" report on the large shorting activity in silver:

During the past 20 to 25 years, the Commodity Futures Trading Commission (CFTC or Commission) has received numerous letters, e-mails and phone calls from silver investors alleging that the price of silver futures on NYMEX has been manipulated downward...

Recently, silver commentators and a group of investors that rely upon them have reasserted their allegations that the silver futures market is being manipulated downward by a small group of traders on the short side of the market. As a result, DMO staff decided to revisit this issue by taking a fresh look at activity in the silver futures market.

For each firm interviewed, their futures trading activities are driven primarily by the desires and needs of the firms’ customers to either buy or sell silver or to assume or hedge financial exposure to silver prices.

The silver commentators tend to rely on the Commitments of Traders reports to portray silver shorts as a group of four—possibly eight traders—intent on suppressing prices.

By contrast, today, the net positions of the large shorts in the silver futures market appear to be market neutral, as opposed to the overwhelmingly long position held by the Hunts.

Their conclusion?

--There is no evidence of manipulation in the silver futures market.

--Examine the motives of those giving market advice ( just trust us!)

--Concentration levels for the top four short futures traders in the silver futures market are comparable to those observed in the gold and copper futures markets, and generally are lower than the levels seen in the platinum and palladium futures markets.

The committee found no evidence of manipulation. The same was said in oil, until a position holder of $55 billion of oil was found to be a speculator. That story didn't get any press, but we know the consequences! Here was that story, on August 15th, right before oil collapsed. If the CFTC missed it in oil, how would they catch it in silver. But it's here, before it happened, in the link below.

The CFTC's conclusion in oil, in the same report as silver, came up with this conclusion:

are largely due to fundamental supply and demand factors....Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.

Now after the "May report" we found out that the short position in gold and silver had gone off the chart in August:

Facts speak for themselves. Here are the facts. As of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever. Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.

For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This was put on as one massive position just before the market collapsed in price

You can read that story here:

So the CFTC started probing the silver market again. You can read that story here:

Now however, this new investigation of the short position in silver is being done by the CFTC's Division of Enforecement, instead of the Division of Market Oversight.

Then the CFTC wrote a letter to Congressman Gary Miller, and the CFTC explained that the large position shorts in silver and gold were previous positions that were taken over by an Investment Bank. In other words, Bear Stearns was short gold and silver, and then those positions went on JP Morgan's book, because Bear's positions weren't hedged.

Fortunately at this time, our Government decided to quit selling silver and gold American eagles.

Of course you could always check the Comptroller of the currency for some of the dreivative positions of our banks. And you would also see that in their latest report, (as of 9/30/08) Citigroup had $126 billion, BAC $161 billion and JPM $145 billion of equity capital. (And this was before the TARP!)

And why wouldn't JPM take over Bear's position? JPM has capital of $140 billion, with $1.7 trillion of assets, and $88 trillion of derivatives.

So why did they need help for Bear's silver and gold shorts?

Because our Government, wants you to trust in their paper, and JPM is their bank!

And if you buy gold, you are voting against their paper.

Friday, gold was up $40 to $900 an ounce. Two weeks ago, Merrill Lynch put out a report that the rich want to own gold bars, and they have insisted they don't want "paper" proxies like ETF's or promises from a bullion bank. They want to own the gold.

So despite all the short positions in gold and silver, the only asset class that has performed in this dreadful bear market, is the only asset class our Government doesn't want you to own!

And as each day goes by, the ranks of the believers in paper thin, and the ranks of the believers in gold grow.

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