(Silver is the Achilles heel of world finance!)
Silver Stock Report
by Jason Hommel, May 14, 2008
I’m looking for a silver expert to talk with about a story I’m working on.
Basically, the CFTC has been getting complaints that the silver futures market has been unfairly skewed to the downside. The commission says there’s no evidence for this, and I’m hoping you can help me with some insight into what the other side of this argument might be.
If you have a second to chat about your thoughts on this, please give me a call.
Commodities reporter, metals
Dow Jones Newswires
Thank you. I’m probably one of the few world experts on silver, including Ted Butler of butlerresearch.com, David Morgan of silver-investor.com, and Jeffrey Christian of CPM Group. Of all those men, I have a much larger market reach than they do, as my newsletter goes out to about 80,000 email readers now, and my readers keep me informed of many things. But the other experts are certain to know more than me in some areas. Jeff Christian is biased in favor of futures contracts, and I’m biased against.
So, the CFTC says that there is no evidence that the silver futures market has moved silver prices to the downside?
If you are willfully blind, or complicit in the manipulation, you won’t see anything, or you will say that.
Here is my proof that there has been manipulation, especially recently.
1. First proof:
Over nineteen major coin shops around the world ran out of silver as the price fell from $21 to $16, as I documented here: http://silverstockreport.com/ssrarchive.htm
from March 19th to April 2, and there are many reports even now that it will take a month or longer to get silver! Some of the big name shops included the Canadian Mint, the U.S. Mint, the Perth Mint, Kitco, Amark who is Johnson Matthey’s number one silver distributor to the public, and Johnson Matthey is the largest silver refiner in the U.S. Other major online dealers popular with investors who ran out included Tulving, NWT Mint, CNI Numismatics, APMEX, bulliondirect.com and more.
How can the price go down, when there is no silver to buy?
2. Second proof:
On May 14, 2004, the CFTC wrote a report to deny allegations of manipulation in the futures market,
They continue to refer to this letter today. The author of the letter, Michael Gorham, director of the CFTC, resigned from the CFTC 3 weeks after writing the letter.
Shockingly, this letter admits the existence of fraud and manipulation in the silver futures market!
How so? They admit that no manipulation to the downside could exist as long as investors have “unrestricted access” to buy silver, but they admit that there are position limits that prevent that from taking place!
On p. 5, they write:
“Because there is unrestricted access to the market, many knowledgeable and well-capitalized traders would readily buy any silver offered at artificially low prices. The buying by these traders–buying that the alleged manipulators would have no way of preventing–would quickly cause the price to rise to its appropriate level.”
However, on p. 8, they contradict that by stating:
“The Commission’s guidance on speculative position limits focuses primarily on the spot month because, in our experience, physical delivery futures markets, such as silver, are most susceptible to threats of manipulation during the spot month.”
In other words, they admit on page 8 that limits exist that prevent large investors from buying silver as they suggest they could do on page 5!
In other words, they are so twisted, that they believe it is a manipulation to buy physical silver!
3. Third proof:
The actual position limits are 1500 contracts per trader. However, these limits do not apply to the traders on the short side, only the long side. The positions on the short side are too large, and concentrated among too few traders. The 8 or less traders have controlled up to 83% of the market, as recently exposed by Ted Butler, in recent weeks; and this represents over 200 days of world silver production, or over about 50,000 contracts. Concentration is the ultimate evidence of manipulation, and it is ignored.
4. Fourth proof:
The very nature of silver itself is that it is not a promise, it is payment in full. All kinds of paper promises are by nature, a substitute for silver and gold, and hence a manipulation, because their very existence creates a substitute demand for something other than physical silver and gold. Thus, even paper money itself, and T-Bills, Bonds, CD’s, savings accounts, are all manipulations that suppress the price of silver. Monetary demand, or investment demand for silver, is as low as it could ever be, since no nation on earth uses silver as money. This reduced demand suppresses the price of silver.
The size of the world paper money market and bond markets probably exceeds $100 trillion, which is $100,000 billion.
The size of the silver market is about 600 million ounces produced each year, and about 75 million ounces purchased by investors each year. At $20/oz., this suggests that the investment demand for silver is only $1.5 billion per year.
Thus, the size of the silver market is about 1 dollar out of 100,000.
In conclusion, I believe I, and now you, have stumbled onto the Achilles’ heel of the world’s financial system. I’m somewhat skeptical that dow jones would let you expose this story to the world. I’d suspect that your story will get buried.