Long time precious metals analyst Ted Butler has started a campaign to try to end price manipulation in the silver markets by asking everyone to copy and paste a letter he wrote to two new top executives taking over at the U.S. Commodities Futures Trading Commission (CFTC).
In the letter, Mr. Butler points out the years of allowed fraud and price manipulation that has gone on in the futures markets of precious metals, and in particular silver, and cites information from the Comex and CFTC's own websites that validate the manipulation going back more than a decade.
So, for anyone with an interest in higher silver prices or who is a believer that free markets, not controlled by large traders gaming the system, is the right way, then there is something you might consider doing. Now is an ideal time to raise these very important issues about concentration and manipulation in COMEX silver. The two officials most responsible for uncovering manipulation at the CFTC just started in this capacity on Monday and should be more open to the facts than otherwise. I can understand how many might feel that contacting these officials and others might be a waste of time, given the agency’s failed record over the years in this regard. Still, I’m not talking about any burdensome effort, just sending a few emails or letters to get straight answers to some very good questions.
I’ve already written to the two new officials (both by email and hard copy) and feel free to use what I sent. I would ask you not to improvise and include other issues, such as gold manipulation. Besides, nothing would impact gold prices more than having the silver manipulation terminated. The best approach is in being as specific and factual as possible so as to pin the agency down. They may refuse to answer and one way of insuring maximum pressure is to write to them through your elected officials. Here’s the letter I wrote that you are free to copy. I’ll include pertinent emails address at the end. - Silver Seek
April 10, 2017
Andrew B. Busch via Email
Chief Market Intelligence Officer
James McDonald
Director - Enforcement Division
Commodity Futures Trading Commission
1155 21st Street NW
Washington, DC 20581
Dear Sirs,
Congratulations and best wishes on your appointments to
key positions at the Commission at this critical time in market history.
I’m writing concerning a matter that the Commission has
considered on a number of past occasions – allegations of a silver price
manipulation on the Commodity Exchange, Inc. (COMEX). The reason the Commission
has considered the issue of a silver price manipulation several times in the
past is because the agency’s own public data and guidelines point strongly to
such a manipulation. Never have the data been more convincing than what was
just published Friday, in the Commission’s release of its weekly Commitments of
Traders (COT) Report, for positions held as of April 4, 2017.
That report indicates that the concentrated net short
position held by the four largest traders in COMEX silver futures hit an
all-time extreme in numbers of contracts of 78,021, the equivalent of 390
million oz. of silver. The concentrated net short position of the eight largest
traders was indicated at 104,978 contracts or the equivalent of nearly 525
million oz., or more than 60% of world annual mine production. No other
commodity comes close to COMEX silver futures in terms of a larger concentrated
short position when compared to real world production. On its face, the large
concentrated short position in COMEX silver futures would appear to be an
artificial price depressant.
As you know, the Commission monitors and publishes
concentration data in all regulated futures markets as the prime front line
defense against price manipulation. After all, it would be nearly impossible to
manipulate any market without a concentrated position. But not only do COMEX
silver futures stand out as having the largest concentrated short position of
any commodity, in terms relative to real world production, consumption and
existing inventories, the concentrated short position in COMEX silver futures
is notable for other reasons.
For one reason, the big short traders do not appear to be
engaged in any sort of legitimate hedging, since there are no signs they
represent actual producers or hedgers of physical holdings. Separate agency
data, contained in the monthly Bank Participation Report, indicate that the
largest shorts are mostly domestic and foreign banks essentially operating as
speculators, in a pseudo-market making capacity against other speculators.
Publicly-owned mining companies are required to disclose any hedge activity and
few, if any have disclosed any hedging in silver. The big short sellers in
COMEX silver futures are financial firms, mostly banks, speculating against
other big speculators and have no legitimate economic or hedging purpose in
dealing in COMEX silver in the first place. As I’m sure you know, Congress
allows futures trading for the purpose of encouraging legitimate hedging, not
to encourage excessive speculation.
The largest COMEX silver short seller for the past nine
years is JPMorgan. That has been the case ever since it acquired the failing
investment bank Bear Stearns, the former largest COMEX silver short seller,
according to Commission data and its correspondence with lawmakers. The special
manipulative twist here is that since 2011, JPMorgan has engaged in an epic
accumulation of physical silver at prices much lower than would have existed if
the bank had not also been the largest silver short seller on the COMEX. In the
recently completed COMEX March silver futures delivery period, JPMorgan stopped
(accepted) 2689 contracts in its own proprietary trading account, plus another
739 contracts on behalf of a client(s), considerably more than the 1500
contracts allowed according to exchange regulations. This while JPMorgan was
the largest short holder in COMEX silver futures. It is not possible to imagine
a more compelling motive or intent for manipulation than to acquire a massive
amount of any commodity at depressed prices, where the acquirer is responsible
for the depressed prices.
Almost without fail, on every past occasion where the
concentrated short position in COMEX silver futures reached extreme levels, it
was only a matter of time before the price of silver gets rigged lower by these
big shorts to induce speculative selling from traders operating on technical
price signals. In fact, COT report data indicate that JPMorgan has never taken
a loss, only profits on every silver short position it has added over the past
nine years. Such results would not be possible in a market that wasn’t
manipulated in price. In essence, speculators have taken over the price
discovery process in silver because there are so few real hedgers trading on
the COMEX, only speculating banks betting against other speculative traders.
Even assuming the current extreme concentrated short position leads yet again
to a sharp selloff in silver, there is another issue that goes to the core of
regulatory concern.
In addition to the clear agency data pointing to a silver
price manipulation, the presence of such a large and non-economic short
position necessarily enhances the likelihood of disorderly market conditions
once it becomes clear to enough market participants that unbacked concentrated
short positions on the COMEX have been the reason why silver prices are so
depressed.
I have communicated all this to the Commission, JPMorgan
and the CME Group (owner-operator of the COMEX) for many years, with hardly any
acknowledgement or rebuttal. I am hoping you will consider this matter
differently and act to finally end the manipulation. I’m sure how you handle
this matter will define your tenure. If I can be of any further assistance,
please do not hesitate to call on me.
Sincerely yours,
Ted Butler
Andrew B. Busch - abusch@cftc.gov
James McDonald – jmcdonald@cftc.gov
Acting Chairman J. Christopher Giancarlo – cgiancarlo@cftc.gov
Commissioner Sharon Y. Bowen – sbowen@cftc.gov
Let me close by telling you that I am very thankful for the
unique opportunity created by the new senior appointments at the CFTC, along
with the simultaneous publication of the most concentrated data in silver
shorting in history. I assure you that I am not holding my breath waiting for
the CFTC to finally step up to the plate and do the right thing; not after 30
years of denial and obfuscation. I know full well that the agency’s denials up
through today have only hardened it to maintain the façade that nothing is
wrong in COMEX silver, despite glaring and growing evidence to the contrary.
Still, it would be a waste not take advantage of an unexpected opportunity.
Ted Butler
April 12, 2017
www.butlerresearch.com
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