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In trying to explain the ongoing silver (and gold) manipulation, I
normally rely upon a straight text approach, using words to convey my
premise. Today, I’m going to alter that a bit and rely more on visual
and audible tools. Thanks to Carl Loeb, I will present two graphs depicting
the concentrated short position of the US banks in all commodities, as
compiled by the CFTC. Also, thanks to Eric King of King World News,
here’s a link you can click on to hear my interview on the topic
Interview
The following two charts attempt to put the size of the concentrated
short position in COMEX silver and gold into some perspective. It’s one
thing to say the short positions in silver and gold are out of line with all
other commodities, and quite another to represent that graphically. All
source data are from the CFTC itself, taken from their most recent Bank
Participation Report for positions held as of June 2, 2009. Bank Participation Report
As the name indicates, this report is designed to measure the extent
of bank holdings in all US regulated futures markets, with a distinction
between domestic and foreign banks. I have intentionally focused on US banks
and only their short positions for a number of reasons. If there is a
manipulation on the short side of silver and gold, as I allege, it can only
be perpetrated by US banks, since the foreign banks’ short holdings are
not large enough. In addition, I am not referencing the long side, for the
simple reason that banks have plenty of money and could conceivably finance
and take delivery of any long position they hold. Delivering against short
contracts is not always a simple case of having enough money. In real
commodities, it often comes down to owning the real material, not a cash
equivalent. For this reason, I have only included “real”
commodities in the graphs. I have excluded all financial and currency futures
and all swaps of all types.
The first graph depicts the percentage of the entire futures market
that US banks hold gross on the short side. The data is taken, without
alteration, directly from the Bank Participation Report. In doing so, the
graph severely understates the true percentage held short in the silver and
gold markets by the US banks, because it includes all spread positions. If
all spreads were removed, as they should be, the percentage of concentration
held by US banks in silver and gold would be 50% larger (half again) of the
amounts shown.
The second graph takes the number of contracts listed in the Bank
Participation Report, converts them to standard units of trade and then
compares them to world annual production
 
These graphs should raise the question as to why are so few US banks
short such large amounts of silver and gold? It wasn’t always this way.
Less than a year ago, in the July 2008 Bank Participation Report, the big US
banks held a short position in silver less than a quarter of the size of
their current short position. In gold, their current gross short position is
16 times greater than what it was then. In fact, the big US banks were
actually net long gold in July 2008. In other words, the big US banks went
from being net long gold in July 2008 to their largest short position in
history.
I know that the CFTC will say that this is all due to JPMorgan taking
over Bear Stearns. But what the heck was Bear Stearns doing with the big
short positions in the first place? More importantly, the takeover
doesn’t excuse the additional shorting put on since the merger was
completed. Given the record of US banks in overall financial matters, that a
small number of them are so heavily short silver and gold, is very troubling.
If there are reasonable explanations for the data coming from the CFTC, they
should be forthcoming.
The manipulation in silver and gold continues. It will continue as
long as the concentrated short position exists. Since neither the banks
involved, nor the CFTC appear willing to deal with this, we must pressure
them. Broad new regulatory reforms are being proposed, including a systemic
risk council. The concentrated short positions in silver and gold held by one
or two US banks are the definition of systemic risk. Please convey this to
your elected representatives and the regulators.
Ggensler@cftc.gov
Mdunn@cftc.gov
Wlukken@cftc.gov
Bchilton@cftc.gov
Jsommers@cftc.gov
Sobie@cftc.gov
Alavik@cftc.gov
Jamie.dimon@jpmchase.com
Dean.Payton@cmegroup.com
Theodore Butler
Investmentrarities.com
Also
by Theodore Butler
To Speak with a Gold and Silver Expert Call
1-800-328-1860
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