phideaux
11-02-2010, 04:14 PM
Is the Unrigged Silver Market Set To Explode?
Justice Litle, Editorial Director, Taipan Publishing Group
Monday, 01 November 2010
[/URL]
http://www.taipanpublishinggroup.com/images/web/Taipan_Daily/100x100/silver.jpgAt long last, a light of truth is shining into the dark corners of the silver market. The results could be explosive.
"The silver market is an inside job."
I'd been hearing that accusation for over ten years -- since my days as a commodity broker in the late 1990s. It was widely believed that the silver market (http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-110110/Print.html#) (trading for less than $5 per ounce at the time) was rigged.
It's been a long time coming. But last week, the accusers finally got some satisfaction. As the WSJ reports,
A Commodity Futures Trading Commission regulator is putting pressure on the agency to take action in a high-profile, two-year-old investigation of the silver market.
At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices.
Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn't publicly disclose trader names...
And then came the lawsuits. Quick on the heels of the CFTC news, J.P. Morgan and HSBC were sued for silver manipulation in a New York court of law. (J.P. Morgan is the megabank that swallowed Bear Stearns. HSBC is a behemoth with British Empire roots dating back to 1865.)
The Morgan / HSBC suit alleges that:
...between in or about March 2008 and continuing through the present, Defendants have combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts... Also during the Class Period, individual Defendants have intentionally acted to manipulate prices of COMEX silver futures and options contracts...
The two banks are accused of reaping hundreds of millions to billions in illegal profits, by way of bearish collusion that represented as much as 85% of all net short positions in the silver market.
Because the suit seeks class action status -- and because the CFTC commissioner (http://www.ibtimes.com/articles/76116/20101026/cftc-commissioner-chilton-sees-manipulation-in-silver-markets.htm) has openly acknowledged shady dealings -- it is unknown how much legal risk this poses to Morgan and HSBC.
But putting that aside, the truly interesting question is this. If the manipulators have been holding silver down all this time, what happens next?
Curious Strength
http://www.taipanpublishinggroup.com/images/web/taipandaily/charts/td-110110-chart.jpg
The silver to gold price ratio is a simple way to measure which
metal is outperforming.
For much of 2010, silver had been either treading water (relative to gold) or lagging behind a bit. But then suddenly, as you can see from the chart above, the silver market just got up and went...
As the plaintiffs in the Morgan / HSBC lawsuit wryly suggest, this shift in tone might -- just might! -- have something to do with the silver manipulators deciding to lay low, thanks to an uncomfortable spotlight being shone upon them.
(If you would like to read more of my investment commentary on other topics, sign up for Taipan Daily (http://www.taipanpublishinggroup.com/profit-taipan-daily-seo3.html).)
Other Reasons to Like the Poor Man's Gold
If the crimes of the manipulators are anywhere near what they are made out to be -- if only a fraction of the accusations are true -- then the silver market could arguably be considered one of the greatest "short squeeze" candidates in the history of markets.
As Daniel Drew liked to say (before Commodore Vanderbilt made him eat his own words): "He who sells what isn't his'n / Must buy it back or go to pris'n." If things get truly nutty as the flushed-out banks are forced to cover, there is no telling how high silver could go.
And in addition to the manipulator exposure angle, there is the little manner of China -- the third largest silver producer (http://www.marketwatch.com/story/golden-share-acquires-a-high-grade-gold-and-silver-past-producer-in-red-lake-camp-ontario-canada-2010-10-28?reflink=MW_news_stmp) in the world after Peru and Mexico. As Bloomberg reports,
Silver exports from China, the world's largest, may drop about 40 percent this year as domestic demand from industry and investors climbs, according to Beijing Antaike Information Development Co.
"There is huge demand in China this year and that has affected exports, which were already hurt after the tax rebate was abolished," said Ng Cheng Thye, head of bullion at Standard Bank Asia. "The demand is coming from all areas, including jewelry, investment and fabrication and this has resulted in a physical market shortage in the Far East."
And then, of course, there are the dollar-destroying actions of the "bearded clam," aka Ben S. Bernanke, Chairman of the Federal Reserve.
If the Fed's first "QE" installment (surely you know those initials by now) is deemed a disappointment this week, precious metals could take a hit. But if Ben delivers, or if conviction rises of a likelihood for QE episodes 3 and 4 and 5, the n watch out.
Don't forget to follow us on Facebook (http://www.facebook.com/pages/Baltimore-MD/Taipan-Publishing-Group/220337511074) and Twitter (http://twitter.com/taipan_trader) for the latest in financial market news, investment commentary and exclusive special promotions.
Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed (http://feeds.feedburner.com/taipan-news). Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com (http://www.taipanpublishinggroup.com/).
Other Related Topics: Investment Opportunity (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Investment+Opportuni) , Justice Litle (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Justice+Litle) , Macro Trader (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Macro+Trader) , Silver (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Silver) , Silver Investments (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Silver+Investments)
[URL]http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-110110.html
Justice Litle, Editorial Director, Taipan Publishing Group
Monday, 01 November 2010
[/URL]
http://www.taipanpublishinggroup.com/images/web/Taipan_Daily/100x100/silver.jpgAt long last, a light of truth is shining into the dark corners of the silver market. The results could be explosive.
"The silver market is an inside job."
I'd been hearing that accusation for over ten years -- since my days as a commodity broker in the late 1990s. It was widely believed that the silver market (http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-110110/Print.html#) (trading for less than $5 per ounce at the time) was rigged.
It's been a long time coming. But last week, the accusers finally got some satisfaction. As the WSJ reports,
A Commodity Futures Trading Commission regulator is putting pressure on the agency to take action in a high-profile, two-year-old investigation of the silver market.
At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices.
Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn't publicly disclose trader names...
And then came the lawsuits. Quick on the heels of the CFTC news, J.P. Morgan and HSBC were sued for silver manipulation in a New York court of law. (J.P. Morgan is the megabank that swallowed Bear Stearns. HSBC is a behemoth with British Empire roots dating back to 1865.)
The Morgan / HSBC suit alleges that:
...between in or about March 2008 and continuing through the present, Defendants have combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts... Also during the Class Period, individual Defendants have intentionally acted to manipulate prices of COMEX silver futures and options contracts...
The two banks are accused of reaping hundreds of millions to billions in illegal profits, by way of bearish collusion that represented as much as 85% of all net short positions in the silver market.
Because the suit seeks class action status -- and because the CFTC commissioner (http://www.ibtimes.com/articles/76116/20101026/cftc-commissioner-chilton-sees-manipulation-in-silver-markets.htm) has openly acknowledged shady dealings -- it is unknown how much legal risk this poses to Morgan and HSBC.
But putting that aside, the truly interesting question is this. If the manipulators have been holding silver down all this time, what happens next?
Curious Strength
http://www.taipanpublishinggroup.com/images/web/taipandaily/charts/td-110110-chart.jpg
The silver to gold price ratio is a simple way to measure which
metal is outperforming.
For much of 2010, silver had been either treading water (relative to gold) or lagging behind a bit. But then suddenly, as you can see from the chart above, the silver market just got up and went...
As the plaintiffs in the Morgan / HSBC lawsuit wryly suggest, this shift in tone might -- just might! -- have something to do with the silver manipulators deciding to lay low, thanks to an uncomfortable spotlight being shone upon them.
(If you would like to read more of my investment commentary on other topics, sign up for Taipan Daily (http://www.taipanpublishinggroup.com/profit-taipan-daily-seo3.html).)
Other Reasons to Like the Poor Man's Gold
If the crimes of the manipulators are anywhere near what they are made out to be -- if only a fraction of the accusations are true -- then the silver market could arguably be considered one of the greatest "short squeeze" candidates in the history of markets.
As Daniel Drew liked to say (before Commodore Vanderbilt made him eat his own words): "He who sells what isn't his'n / Must buy it back or go to pris'n." If things get truly nutty as the flushed-out banks are forced to cover, there is no telling how high silver could go.
And in addition to the manipulator exposure angle, there is the little manner of China -- the third largest silver producer (http://www.marketwatch.com/story/golden-share-acquires-a-high-grade-gold-and-silver-past-producer-in-red-lake-camp-ontario-canada-2010-10-28?reflink=MW_news_stmp) in the world after Peru and Mexico. As Bloomberg reports,
Silver exports from China, the world's largest, may drop about 40 percent this year as domestic demand from industry and investors climbs, according to Beijing Antaike Information Development Co.
"There is huge demand in China this year and that has affected exports, which were already hurt after the tax rebate was abolished," said Ng Cheng Thye, head of bullion at Standard Bank Asia. "The demand is coming from all areas, including jewelry, investment and fabrication and this has resulted in a physical market shortage in the Far East."
And then, of course, there are the dollar-destroying actions of the "bearded clam," aka Ben S. Bernanke, Chairman of the Federal Reserve.
If the Fed's first "QE" installment (surely you know those initials by now) is deemed a disappointment this week, precious metals could take a hit. But if Ben delivers, or if conviction rises of a likelihood for QE episodes 3 and 4 and 5, the n watch out.
Don't forget to follow us on Facebook (http://www.facebook.com/pages/Baltimore-MD/Taipan-Publishing-Group/220337511074) and Twitter (http://twitter.com/taipan_trader) for the latest in financial market news, investment commentary and exclusive special promotions.
Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed (http://feeds.feedburner.com/taipan-news). Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com (http://www.taipanpublishinggroup.com/).
Other Related Topics: Investment Opportunity (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Investment+Opportuni) , Justice Litle (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Justice+Litle) , Macro Trader (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Macro+Trader) , Silver (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Silver) , Silver Investments (http://www.taipanpublishinggroup.com/Search.html?areas[0]=jtags&searchword=Silver+Investments)
[URL]http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-110110.html