Wednesday, October 27, 2010

Silver Price Manipulation

Sat down and opened my computer tonight to the headline I've been waiting to see for 6 long years as a silver investor:

"JP Morgan and HSBC Sued For Silver Market Manipulation, Reaping Billions In Illegal Profits."

I've discussed this topic exhaustively over the past 3 years but here is a quick update:

Two large banks control close to 90% of the short interest in the silver market.  Shorting an asset means you sell it into the market with the plan to purchase it back in the future.  (If the price is lower you collect the difference)

The problem is that these two banks have sold short years worth of silver supply into the market without ever owning the asset.  All these "sales" have kept the price suppressed and at times taken down the price significantly. (Summer 2008)

The Commodities Futures Trading Commission has continued to turn a blind eye to the blatant manipulation.  However, yesterday the Financial Times rocked the silver market with this:

Bart Chilton, commissioner at the Commodity Futures Trading Commission, said "members of the public" and "publicly available documents" convinced him the silver markets are tainted by violations of federal commodities law.


"I do believe that there have been repeated attempts to influence prices in the silver markets," Mr Chilton said on Tuesday at a meeting in Washington. "There have been fraudulent efforts to persuade and what I consider deviously control that price."

Now the public is stepping in with lawsuits.  If these big banks are unable to illegally suppress the price downward moving forward, it will ultimately mean seemingly impossible upside price targets for the silver price.

Remember, we are in the early stages of a global currency crisis.  Plus there is the BIG kicker, which the public will discover when it begins to move into the silver market:

Above ground silver inventory is 3 times less than gold.

Huge victory for the often labeled "crazy silver conspiracy theorists" this week.  But the war is far from over, and there will be major price swings ahead.  Tonight though, we can smile and enjoy the silver war cry.

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