$15 Silver? You can't have any!

[theo]

http://blog.milesfranklin.com/15-silver ... t-have-any

A pretty good article. I thought the part discussing the price manipulations were compelling. Also, the author responds to several readers in the comments section.

"Before going any further on the silver topic I want to stop anyone in their tracks who refuse to see that the price of gold and silver are suppressed. Wednesday in the wee hours of the morning at 12:30 AM, someone sold 13,000 COMEX gold contracts which pummeled the price of gold by over $20. In perspective, the size and timing of this is hilarious! 12:30 in the morning? India was on holiday while Japan and China were on lunch breaks …not to mention the outright size. This 1.3 million ounces (40 tons) works out to $1.5 billion dollars or nearly seven days of global production! Who has this amount of gold to sell? Or to even hedge? It is not as if gold is just sloshing around because GOFO lease rates are now more negative than any time in the last 10 years! The gold market was very tight PRIOR to this sale, the sale only made the market tighter and served to clear the shelves. No real seller looking for the “best available price” would sell huge volume like this at THE most illiquid moment in global markets, apologists like Martin Armstrong and Doug Casey might take a stab at explaining this one away? Selling in this manner can have only one result and one purpose alone, affect the price downward …end of story. (The previous was written on Saturday, news out Sunday that UBS will be fined for manipulating gold and silver prices)!!! It is now a fact folks!"

[brian0918]

I asked Keith Weiner, who runs the Gold Standard Institute, and is highly skeptical of claims of manipulation, for his opinion on this. Here was his response:

One specious assertion after another.

12:30 time US (I presume) is morning in Europe.

Who sold? It could be a stop-loss order or a margin call, or an order generated by a firm's internal risk controls department.

You can't get anywhere starting from the time of day in the gold market, nor from the size of the order (if it was actually one order, an assumption I would not concede without evidence).

These people are stuck on quantity theory of money. It holds that rising money supply --> rising prices. Especially the price of gold. Which they say they are buying to avoid certain dollar collapse. But, they get angry when the price of gold falls. Why? They bought gold for profits--more of the very dollars they just said would be worthless.

A falling gold price causes them losses.

Since rising money supply --> rising prices (in their theory) then a falling gold price means manipulation.

A second reply from him:

There's an interesting asymmetry in the goldbug analysis. If a bank sells a future, that's "naked", immoral, and maybe should be illegal.

If a speculator buys a future--equally unable to pay and take delivery as the bank is to deliver--that's all good.

The speculator does not concern himself with the notional value. He wants the leverage, to bet big.

[Thogey]

Thanks for the post brian,

I, as well, always wonder why falling prices is manipulation and rising prices is pure market.

You just can't wrap you whole financial and emotional well being around the price of metal.

I for one am very excited about gas prices falling. We are at $2.80's here now. It is nice being able to pocket an extra 20 bucks with each fill-up.

[68Camaro]

Manipulation can purposely create rising prices as well. It's the patterns that don't make sense, at least if traders were using the market for what it is intended. But traders with the ability to at least bluff sizable positions can create their own "weather", and they can work in either or both directions (but it is easier to do going down).

[theo]

I've always thought that silver was manipulated up to $49 in order to trap and then fleece the speculative longs. What followed has been a series of waterfall declines (many on no news) interspersed among periods of consolidation. Although I do not possess the expertise to specifically identify the manipulation, much of this price action seems suspicious. I'm sure everyone remembers the sell off on 5/1/11 was made into a rout when the CFTC cut the margins. Categorizing what happened in those first few days of May 2011 as natural market behavior is a stretch.

I've also thought that the motivation of the players involved makes a compelling argument. For the dollar, or any fiat currency, to remain viable; gold and silver MUST be discredited as reliable stores of value. Allowing both assets to increase and then pullback sharply keeps them both from serious consideration by mainstream investors.

[68Camaro]

Regardless of high level conspiracy theory (some of which could be true) there are at least two notable long term trends going on in PMs.

1) market now driven by house rules where a core cabal can make money going up or down because they know what we don't and will use that to suck off the top
2) Increased long term investor and central bank and Chinese household demand

[beauanderos]

Normal "for profit" markets don't operate with nearly identical waterfall declines (only the magnitude differs) at the same times of day, nearly almost every day, for years in
a row. Only some entity with unlimited funding (funny money, anyone?) can operate without regard to profit, to continue to push pricing at their behest, to points where it
benefits their motives. Whether or not the cycle has become self-perpetuating (hedge funds jumping on the trend they have identified and going along for the ride) or not,
the trading action in silver and gold is not natural.

[theo]

I had a chance to re-read this analysis and I have a few problems:


"12:30 time US (I presume) is morning in Europe."

He presumes right. 12:30 am EST is 5:30 am London time and 6:30 am Paris time. It might be 7:30 am in Berlin but I'm not sure. None of these markets are even close to being open. The fact the writer would not take the 2 minutes required to confirm these times makes me question his motivations.

There's an interesting asymmetry in the goldbug analysis. If a bank sells a future, that's "naked", immoral, and maybe should be illegal.

If a speculator buys a future--equally unable to pay and take delivery as the bank is to deliver--that's all good.

The speculator does not concern himself with the notional value. He wants the leverage, to bet big.

Correct me if I'm wrong, but if a speculator buys a gold future contract is it an option to buy the asset at specified price. In other words there is no expectation for the speculator to take delivery. On the other hand if an investor sells an asset short, they are claiming to hold that asset in the event the speculator (who bought the contract) decides to take delivery. If there is no real claim to the asset, then the transaction has no real meaning and therefore; no bearing on the true value of the asset.

These people are stuck on quantity theory of money. It holds that rising money supply --> rising prices. Especially the price of gold. Which they say they are buying to avoid certain dollar collapse. But, they get angry when the price of gold falls. Why? They bought gold for profits--more of the very dollars they just said would be worthless.

Or perhaps they are angry because they are witnessing largest price fixing scheme in history continue with little protest and no accountability. Basic economics holds that (all things being equal) as the quantity of an asset increases its price/value declines. Why does he think that the dollar or any other fiat currency would be any different? Of course the stagnant economy and almost non-existent money velocity is allowing the dollar to maintain its value for now but that can't last forever.

[oober]

I've always thought that silver was manipulated up to $49 in order to trap and then fleece the speculative longs. What followed has been a series of waterfall declines (many on no news) interspersed among periods of consolidation. Although I do not possess the expertise to specifically identify the manipulation, much of this price action seems suspicious. I'm sure everyone remembers the sell off on 5/1/11 was made into a rout when the CFTC cut the margins. Categorizing what happened in those first few days of May 2011 as natural market behavior is a stretch.

I've also thought that the motivation of the players involved makes a compelling argument. For the dollar, or any fiat currency, to remain viable; gold and silver MUST be discredited as reliable stores of value. Allowing both assets to increase and then pullback sharply keeps them both from serious consideration by mainstream investors.

I remember the CFTC raising margins, 5 time in about 8 business days, I was short till the 2nd margin call, I went long. lost 6 figures. Last time they raised margins that many time in such a short period was 1980

[oober]

I've always thought that silver was manipulated up to $49 in order to trap and then fleece the speculative longs. What followed has been a series of waterfall declines (many on no news) interspersed among periods of consolidation. Although I do not possess the expertise to specifically identify the manipulation, much of this price action seems suspicious. I'm sure everyone remembers the sell off on 5/1/11 was made into a rout when the CFTC cut the margins. Categorizing what happened in those first few days of May 2011 as natural market behavior is a stretch.

I've also thought that the motivation of the players involved makes a compelling argument. For the dollar, or any fiat currency, to remain viable; gold and silver MUST be discredited as reliable stores of value. Allowing both assets to increase and then pullback sharply keeps them both from serious consideration by mainstream investors.

I remember the CFTC raising margins, 5 time in about 8 business days, I was short till the 2nd margin call, I went long. lost 6 figures. Last time they raised margins that many time in such a short period was 1980

[Cu Penny Hoarder]

I've always thought that silver was manipulated up to $49 in order to trap and then fleece the speculative longs. What followed has been a series of waterfall declines (many on no news) interspersed among periods of consolidation. Although I do not possess the expertise to specifically identify the manipulation, much of this price action seems suspicious. I'm sure everyone remembers the sell off on 5/1/11 was made into a rout when the CFTC cut the margins. Categorizing what happened in those first few days of May 2011 as natural market behavior is a stretch.

I've also thought that the motivation of the players involved makes a compelling argument. For the dollar, or any fiat currency, to remain viable; gold and silver MUST be discredited as reliable stores of value. Allowing both assets to increase and then pullback sharply keeps them both from serious consideration by mainstream investors.

I remember the CFTC raising margins, 5 time in about 8 business days, I was short till the 2nd margin call, I went long. lost 6 figures. Last time they raised margins that many time in such a short period was 1980

You don't seem too upset about it. Ouch.