Who Killed Silver? The Smoking Gun

The biggest question in recent weeks has been “Who killed silver?” Who was responsible for the 38% price drop in silver? Our hero, Ted Butler, looked at the COT report just out and has revealed the answer in his latest column.


For years, the data contained in the weekly Commitment of Traders Report (COT), issued by the CFTC, have indicated that several large COMEX traders have manipulated the price of silver and gold. For an equal number of years, the CFTC has reluctantly responded to public pressure over this issue with blanket denials of any wrongdoing.

The recent widespread shortage of silver for retail purchase coupled with a price collapse appears to have shaken these analysts’ confidence that the COMEX silver market is operating ‘fair and square.’

For any remaining doubters that COMEX silver and gold pricing is manipulated, the following CFTC data should be considered. This data is taken from a monthly report issued by the CFTC, called the Bank Participation Report.

Here are the facts.
As of July 1, 2008, two U.S. banks were short 30,995,000 ounces.
As of August 5, 2008, two U.S. banks were short 169,025,000 ounces, an increase of more than five-fold.

This is the largest such position by U.S. banks I can find in the data, ever.

Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.

Is there a connectionbetween 2 U.S. banks selling an additional 138 million ounces in a month, followed shortly thereafter by a severe decline in the price of silver? That’s equal to 20% of annual world mine production or the entire COMEX warehouse stockpile, the second largest inventory in the world. How could the concentrated sale of such quantities in such a short time not influence the price?

What real legitimate business do 2 U.S. banks suddenly have for selling short such quantities of speculative instruments over a brief time period? Do we want banks to be engaging in this type of activity? If the manipulation was not successful, would U.S. taxpayers be called on to bail out yet another bank speculation gone bad?

Do the traders who lost money in the recent price collapse of silver have a reason to believe that their money is now in the pockets of these two or three U.S. banks? If so, do they have recourse?

The data in the Bank Participation report is so clear and compelling that it is hard to conclude anything but manipulation. It is beyond credulity to conclude other than two or three banks caused one of the most severe price collapses in precious metals history. The CFTC has a lot to answer for as the regulatory agency responsible for preventing this type of blatant manipulation.

No, the CFTC will NOT name the two banks in question.

◊◊◊◊ Now: Gold @ $827.40, Silver @ $13.48, USDX @ 76.75 ◊◊◊◊
◊◊◊◊ Now: DJIA 11,598.10


2 Responses

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