• Gold: 1,255.29 6.04
  • Silver: 14.76 0.12
  • Euro: 1.142 0.006
  • USDX: 96.641 -0.463
  • Oil: 47.95 1.69

No Manipulation, After All?

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February 15, 2018 - 9:08am

In the never-ending search to either verify or rebut one’s own findings, I’d like you to consider something different today. I’m going to ask you to set aside my highly specific allegations of wrong-doing in the silver and gold markets, mostly centering on JPMorgan, and focus instead on whether if what I allege is really wrong or even matters much. Even though my allegations are based upon data published by the CFTC and CME Group, I would ask you to put that aside and consider that I may have been making a mountain out of a molehill about silver (and gold) price manipulation.

The best way of determining whether there is anything wrong in silver is to do a controlled experiment, namely, by removing it from the equation (along with any mention of JPMorgan) and substitute any other world commodity or entity in its place. In other words, would it be patently and outrageously illegal or no big deal at all if what is transpiring in silver occurred in any other commodity? I’ll present the facts and leave you to be the judge.

Pick any and every commodity with an active futures derivatives market that comes to mind and plugin the facts that are known to have existed in COMEX silver over the past ten years. Any and every commodity – corn, copper, crude oil, no exceptions. Now let’s plug in what we know in terms of facts that exist in silver.

First, we know from COT report data that a single entity has held a consistently large concentrated short position in COMEX silver, larger in terms of actual world production than in any other commodity. We further know that this large entity has always been the largest futures market short in COMEX silver over the entire decade; never flipping to net long. Next we know from COT data that while this uniquely large concentrated short seller has always been net short, its short position has both expanded and contracted regularly over the years and - get this – it has never lost money as it added or bought back short COMEX futures contracts. Never a loss, always only gains, a stunningly perfect trading record. This is determined in silver from observing changes in the concentrated short position of the largest short entity.

Finally we know, from the same source data used in the COT report but published separately in the Bank Participation report, that the dominant short seller in COMEX silver is a large US bank. Although this fact, by itself, wouldn’t be necessarily germane to the question if a manipulation exists or not, it does help tie in other facts.

You should now be envisioning any world commodity that comes to mind having had a single dedicated and dominant futures market short seller who has been consistently short for a decade and who has a perfect trading record - never suffering a loss and only having made profits from the short side.  Wouldn’t you be at least a little suspicious that something was wrong or that the market was rigged? Or would the existence of a single large trader, always short and never long or wrong for ten years running in corn, copper or crude oil or any other commodity not bother you at all?

Before you make up your mind, let me add in a few related facts. What if I told you that the same single dominate futures market short seller had spent the last seven years, in addition to maintaining its perfect paper trading as the largest short seller of all, also acquiring a massive physical hoard of the same commodity? And get this – this same paper market dominator had managed to acquire the largest physical stock pile in history of this same commodity.

Wouldn’t the thought cross your mind that maybe this big entity was milking this particular commodity in an underhanded manner, not only achieving the first perfect trading record ever and then taking advantage of the overall lower prices its massive short selling caused by buying all it could of the same commodity in a different form? Wouldn’t this sound like the perfect commodity price manipulation, namely, the manipulator making on both sides, milking the paper side and then using its price influence to buy the physical side in massive quantities and at depressed prices?

But wait, there’s more. What if I told you that there was a federal regulator, as well as a self-regulating entity in existence, in the form of the CFTC and the CME Group, who were specifically mandated with preventing such a scheme as I just outlined as their primary mission? Neither regulator has said anything about any of this for ten years, although the CFTC closed a formal five-year investigation into silver manipulation in 2013, which was inconclusive to say the least. Oh, and the financial institution identified as the big silver manipulator, JPMorgan, hasn’t said a peep about being publicly accused of criminal wrongdoing. Most usually, financial institutions are interested in maintaining the highest reputation possible and immediately address any issues contrary to their best interest. Not so with JPMorgan and silver.

So, you make the call. If the facts that are known to exist in silver were present in any other commodity, would this constitute manipulation in your opinion? Or if the facts were sufficient enough so as to require the CFTC, the CME, and JPMorgan to at least try to explain why manipulation wouldn’t exist in silver, given the verifiable facts? You might want to remember this the next time someone declares that no manipulation exists in silver or even better, that all markets are manipulated, so who cares?  Just ask them which market features the largest paper short who also happens to be the largest physical buyer of that same commodity?

Ted Butler

February 15, 2018

Questions or comments –  info@butlerresearch.com

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About Theodore Butler / Commentary Author

After publishing unique precious metals commentary on the Internet since 1996, I have decided to offer a subscription service. The main reason for the change is that I felt somewhat restricted by my weekly format.

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