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Not
being much of a conspiracy theorist, last week’s hearing by the CFTC (Commodities
Futures Trading Commission) on futures market trading for metals was a
subject of some
interest to me, but the news flow since that time has been rather remarkable
– if for no other reason that none of the news seems to be flowing in
the mainstream media.
In
fact, a search at the Wall Street Journal on
“Gensler” (CFTC Chairman Gary Gensler would surely be included in
any report)
produces only this one item from before
the hearing.
You’d
think that, if a news organization that normally finds time to report on the
most arcane of financial market goings-on saw fit to publish a story before the hearing was
held, they’d also figure it was worthwhile to let their readers know
what happened at
the hearing.
Apparently
not.
The
one story($) that the search did turn up quickly gets
to the heart of the argument against
imposing position size limits for metals markets – the real question
that the hearing was attempting to answer:
Imposing
new speculative trading limits on metals futures contracts is unwarranted and
could have an adverse impact on U.S. markets, some exchange and bank
officials will tell the Commodity Futures Trading Commission Thursday.
Later
in the story they mention that GATA (Gold Anti-Trust Action Committee)
chairman Bill Murphy was planning to speak though, curiously, they failed to
mention him by name and then, even more curiously, they followed this mention
up with almost three times as many words bashing those, like Murphy, who
allege manipulation in these markets.
One of
the staunchest believers in the allegations of gold manipulation—the
chairman of the Gold Anti-Trust Action Committee—will testify as well.
But
others, including the CME’s Mr. LaSala and John J. Lothian, a commodity
trading advisor, futures broker and the head of a well-known markets
newsletter, will urge the CFTC not to pay attention
to arguments that there has been manipulation.
“Those
who believe gold and silver markets are manipulated to keep prices low are
nothing more than politically opportunistic rent seekers in my book,”
Mr. Lothian planned to say. “They are parasites on the body public
profiting from selling fear and seeking political change that will benefit
their world view and related market position.”
Now,
that’s some stunningly unbalanced reporting on a subject that,
admittedly, anybody anywhere near Wall Street probably doesn’t
want to contemplate – that markets are rigged. But, in the broader
scheme of things, wouldn’t it be better to just let “those crazy
gold bugs” have their day and be discredited once and for all if they
really are as nutty as the WSJ would have us believe?
Well,
if you read the Wall Street Journal, you’ll never know what happened at
the hearing and whether the CFTC paid any attention to them, but, if you look
elsewhere, you’ll read about all kinds of interesting developments
during and after the meeting.
Here’s
a partial list:
GATA’s evidence of silver and gold manipulation at CFTC
hearing – Mineweb
CFTC Gets Facts of Bullion Manipulation
– Numismaster
JP Morgan
Chase Caught Manipulating Gold & Silver Market
– Firedog Lake
Whistleblower Speaks Out On JP Morgan Market Manipulation
– Jesse’s Cafe
Former Goldman Analyst Confirms LMBA Gold Market Is “Paper
Gold” Ponzi – Zero Hedge
Whistleblower in Silver Manipulation Struck by Hit and Run Car In
London – Jesse’s Cafe
King World Interview with Andrew Maguire the Silver Market
‘Whistleblower’ –
Jesse’s Cafe
King Interview With GATA On The Biggest Gold Manipulation Story
Disclosed – Zero Hedge
Now,
of all the sources above, the Mineweb story is probably the most mainstream
and they had a few interesting observations and conclusions:
Some
observers feel that the Gold Anti Trust Association (GATA’s) long held
views on a conspiracy by some major banks and government entities to
manipulate precious metals prices are off-target, but the latest
evidence produced by GATA chairman Bill Murphy in open testimony at the CFTC
hearing is compelling assuming the source material is accurate.
The
evidence came in the form of a series of emails, and accompanying commentary,
from a London metals trader, Andrew Maguire, who contacted GATA on March 23rd
regarding alleged rigging of the precious metals markets by JP Morgan among
others, through shorting the markets around key economic data releases,
describing in detail how this is achieved. Maguire,
Murphy contends, informed the CFTC enforcement division of this market
manipulation ahead of the release of farm payroll data in February this year
and set out not only how the manipulation would be achieved two days in
advance, but also sent real time emails to the CFTC investigators as the
alleged manipulation was taking place. According
to Murphy the metals prices followed the scenario precisely – something
which he felt could not be predicted without prior knowledge of the
manipulation of the markets by major players with huge financial clout.
Now,
why couldn’t the Wall Street Journal report something like that?
It
seems to be a rather important development and one that anyone even remotely
related to the gold and silver market would surely be interested in.
For
the first time ever, a whistleblower has stepped forward citing
specifics of a market rigging as it was occurring in real time.
Now,
there were more than a few strange goings on at the hearing, one of which was
that the video feed went dead just as Bill Murphy was about to detail the
Maguire story for the CFTC. Here’s the video (that no one was able to see at the
time) in which Murphy details Maguire’s charges that massive short
positions by HSBC and JP Morgan aimed out flushing out longs occur regularly
and predictably, in a coordinated fashion.
The
fact that whistleblower Maguire was struck by a hit and run driver in London
the next day adds to the intrigue. He was apparently not injured badly as he
was able to do an interview with Eric King a couple days later in which he
sounds completely sane (see link from above).
Of
course, the case that the “gold bugs” should be ignored
wasn’t helped by Jeff Christian of the CPM Group clumsily defending the
current system and, in the process, essentially, admitting that there is
little or no actual precious metal backing the trading in London – that
it’s strictly a “paper market”, which, to most people makes
no sense.
How
can you have “price discovery” on a futures market when few of
the sellers have anything to sell?
Patrick
Heller at Numismaster (see link from above) put it this way:
In
effect, the commissioners were told that almost
all of the trading activities on the London exchange were merely settled by
paper for paper, not for physical metals as the exchange supposedly requires.
Further, the commissioners were told that it was impossible for the London
exchange to ever deliver all the gold and silver owed to the owners of
contracts.
After
the hearing, GATA publicly released copies of Maguire’s e-mails with
the CFTC. Murphy also revealed that Maguire had
recorded all of his telephone conversations with the CFTC without asking for
their permission to do so. This is legal to
do in Britain, but such recordings cannot legally be provided to other
parties. GATA is currently working to ensure that these recorded
conversations can be legally released to the public.
You’d
think there’s something in here that the Wall Street Journal would have
found newsworthy.
Reuters
filed this report after
the conclusion of the hearing and they too failed to mention anything other
than opposition to any idea of position limits in metal markets. A Google
News search on “Gensler” confirms the virtual
blackout by the mainstream news media, the only source of information coming
from, well, blogs just like mine.
You’d
think the mainstream media would at least acknowledge that something happened.
The
real problem here is that the CFTC is being put in a tough position.
There
is widespread agreement that something needs to be done to limit trading
position sizes in energy markets because, when Goldman Sachs or some hedge
fund start driving the price of oil to $120 or $150 a barrel, then gasoline
prices surge past $4 a gallon and, not only is this bad for the economy, but,
people are understandably miffed and they start complaining to their
Congressmen.
But,
if, as Maguire charges, big banks like HSBC and JP Morgan use these same
kinds of concentrated positions on the short side for gold and silver in an
attempt to keep prices down amid growing troubles in a world full of paper
money, it would seem inconsistent (as a minimum) to not take action here
as well.
If
what Maguire says is true, it’s really the same thing – one or two
players who are so big and so powerful that they can move prices whenever and
wherever they want to, profiting all along the way.
Tim
Iacono
Iacono
Research.com
Tim Iacono is
the founder of Iacono Research which provides market commentary and
investment advisory services specializing in macroeconomic analysis and
commodity based investing. He also writes the popular blog The
Mess That Greenspan Made.
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