Silver Price Manipulation: Facts and Frustration

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September 27, 2013 3:21pm NYSE:AGQ NYSE:SLV

silver-etfTony Daltorio: It was a rather quiet week in the silver market. Silver prices dropped about 50 cents an ounce to trade in the $22 an ounce range.

The only real news – major news, that is – in the marketplace was the decision by the Commodity Futures Trading Commission (CFTC) to announce that its probe into silver price manipulation by the large Wall Street banks is closed without any action taken. This is after a five-year probe into the workings of the silver market.


Some silver investors must think the CFTC was staffed by Japanese monkeys.

You know the monkeys I’m referring to, from the proverb “see no evil, hear no evil, speak no evil.” The first monkey (Mizaru) covers his eyes, the second (Kikazaru) covers his ears, and the third (Iwazaru) covers his mouth.

The original monkeys appeared in a carving over a door at the renowned 17th century Tosho-gu shrine in Nikko, Japan. But I think they are a good way to symbolize this regulatory ineptness…

Here’s the CFTC’s reasoning for dropping the case.

Why CFTC Drops Silver Prices Case

The CFTC decision followed a decision six months earlier by a U.S. District Court to dismiss a class-action lawsuit claiming silver price manipulation against JPMorgan Chase (NYSE: JPM).

The CFTC spent more than 7,000 hours reviewing data on silver positions and related derivatives.

There was a difference between this investigation and others previously conducted by the Commission.

In prior inquiries, the CFTC said it found no evidence of wrongdoing. But in this latest investigation, it stated it had not found sufficient evidence to bring a case.

The CFTC statement said: “Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets.”

In other words, they may have found something. But the CFTC must have felt it wasn’t enough to win a case against high-paid Wall Street lawyers.

This decision highlights the fact that regulators face very stiff obstacles in proving market manipulation despite the expanded powers the CFTC received in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

But the CFTC’s own data reveals some interesting facts. . .

Silver Price Manipulation: Facts and Frustration

According to CFTC data, Wall Street banks hold 45.6% of the entirety of the short silver futures position on the Comex exchange. But these same banks own a mere 8.7% of the long silver positions on the Comex.

Wall Street banks fluffed this off though.

They told CFTC investigators that those positions did not tell the whole story, that it’s only one part of their precious metals holdings.

Bart Chilton is the Democrat CFTC commissioner most favorably disposed toward those believing manipulation has occurred.

In 2010 he said there were indeed “fraudulent efforts” to “deviously control” silver prices.

But all he could say now was “There’s not been a more frustrating nor disappointing non-policy-related matter at the CFTC.”

Frustration and disappointment must surely describe some of emotions felt by those in the silver market toward the CFTC.

We examined the manipulation of silver prices in 2012, when our metals and mining expert Peter Krauth spoke with silver market guru Ted Butler. Get the full story here – and judge for yourself on whether or not there’s heavy silver manipulation…

Money MorningWritten By Tony Daltorio From Money Morning

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