Wednesday, October 27, 2010

Manipulation of Silver price

The price of Silver rose sharply last night, from a low of $23.20 to a high above $23.90 before settling a little off the highs at just above $23.80 (US price). The AUD price of Silver also saw a similar spike with a close just above $24.20.

It seems likely that the short term correction in the price of Silver is over and that we will be soon on the way to fresh 30 year highs. As I previously blogged in mid September I believe Silver is in the process of forming a parabolic spike that will take the price to a minimum $28-31. However, there are events that could push the price much higher and comments overnight from Bart Chilton could very well point to information that could be the catalyst to send the price of Silver higher:
Silver Subject to Price Manipulation, Chilton Says
Oct. 26 (Bloomberg) -- As an investigation of the silver market by the top U.S. commodity regulator entered a third year, a member of the Commodity Futures Trading Commission said today there have been “repeated attempts” to influence prices.

“There have been fraudulent efforts to persuade and deviously control that price,” said Commissioner Bart Chilton at a hearing today in Washington, alleging there have been violations of the Commodity Exchange Act. “Any such violation of the law in this regard should be prosecuted,” he said.

The five-member commission began investigating allegations of price manipulation in the silver futures market in September 2008. The CFTC said in a report that year that it had received “numerous letters, e-mails and phone calls” during the last 20 to 25 years alleging prices were being manipulated downward.
For most of us it's simply confirmation of the obvious. I have seen the topic of Silver or Gold price manipulation dismissed as tinfoil hat material (aka crazy talk with no basis), so to see the same information start to hit reputable/mainstream financial news sites is quite refreshing.

Silver has the most concentrated short position of all commodities recorded by the CFTC:

If any of these large players start having to liquidate their short positions either due to a continued rise in the price of Silver or with the introduction of new laws being considered by the CFTC then we may soon be looking at a Silver price much higher than it is today and likely higher than the $50 top seen in 1980.

Tighter derivatives rules gain headway in U.S., EU
"Quote stuffing," or flooding the market with large numbers of rapid-fire orders and canceling them almost immediately, is also under scrutiny, as is possibly writing new rules requiring traders to test and monitor their algorithms, or sequences of rapid trade orders.

For months, CFTC commissioners have said the agency needs to use its new powers to counter disruptive trades made by high-frequency algorithms.
Reuters - October 26, 2010

Metal-Trading Limits Weighed by U.S. Regulator
March 25 (Bloomberg) -- U.S. regulators are considering limits on how much of the market for metals including gold and copper that speculators can control after last year’s financial crisis spurred record swings in futures prices.

The U.S. should be on the “fast track” to expand regulation because “excessive speculation” by hedge funds and other large traders are “contorting” the market, Bart Chilton, one of five members of the U.S. Commodity Futures Trading Commission, said today during a public meeting in Washington.
Bloomberg - March 25th, 2010

Disclosure: Position held in Gold & Silver. Not investment advice. Do your own research.

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