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The reaction to the CFTC meeting on March 25
continues to be great in precious metals circles. More commentary has been
generated by this meeting than even I expected. The hearing brought to the
forefront the most important issues in silver, namely, position limits,
concentration and the allegations of manipulation on the short side. This is
great news for silver and gold investors, as it promises to finally expose
and remedy the 20-year downward manipulation in silver.
The hearing and the attendant commentary
bring us to an important juncture - what to do now? To properly address this
question it is important to understand what brought us this far. What
precipitated the CFTC hearing was the simple fact that many hundreds of you
wrote to the Commission over the past year or so about the specific issues
discussed at the meeting. Without you writing to the Commission, there would
have been no public meeting. Therefore, the answer to what to do now is
obvious – you must write to them again. This time, the Commission is
actively seeking your comments for inclusion in the public record.
I can’t emphasize how important it
is that you write to the CFTC. I will provide you with instructions for how
to do so, and even a sample letter. First, I will remind you that our success
wasn’t just due to the fact that so many of you had written to the
Commission. More importantly, you
wrote to them about the substantive issues concerning position limits and
concentration in COMEX silver and gold. These are the issues that the
Commission has indicated it is interested in, and these are the issues we
must stick to now. I promise you that if legitimate speculative position
limits are established in COMEX silver futures and the big shorts are not
allowed to circumvent those limits, the silver manipulation will be
terminated.
It is important that you not wander too
far afield in what you are asking the Commission to address, either because
it is out of their jurisdiction or by making comments on unsubstantiated
allegations. This will lessen the impact of what must be done. For example,
many have recently written to me concerning allegations that there are 100
ounces of paper gold issued for every ounce of real gold that exists. The
evidence indicates this is simply not true. There are many times more ounces
of real gold than paper gold. The entire gold open interest at the COMEX, one
of the largest markets in the world (I think the largest), equals 50 million
ounces, and that includes all sorts of spreads that overstate the total
amount of this paper gold. There are 2 billion ounces of gold bullion in the
world, perhaps 3 billion ounces (out of a total of 5 billion gold ounces in
all forms), so there are 40 to 60 times more ounces of gold bullion than the
gross open interest on the COMEX. It is true, however, that there are more
paper ounces of silver in the world than silver bullion; but not by 100
times, maybe by 1 to 3 times. This includes pool accounts and silver bank
certificates. No other commodity has paper obligations greater than what
exists in the world. But neither would I raise this issue with the Commission
in your comments at this time.
My advice is not to bring up unproven
assertions and matters outside the Commission’s jurisdiction. Stick to
the bedrock issues that brought about the hearing in the first place; silver
position limits, exemptions to those limits and concentration. Ask the
Commission to do what is within their power to do. Keep it simple and direct.
By all means be professional and courteous. You are asking the CFTC to do
something that is vital for the markets and in the interest of the American
public. But above everything else, write to them. Do not think for a moment
that your voice will not be heard. Your voice has already been heard and
acted on; it will be heard and acted on again, but only if you write to them.
This is not complaining; this is about doing something important. It will
take a few moments, won’t cost you anything, and promises to make a
profound difference. How many better proposals have you been offered today?
The last time there was a public comment
period, unfortunately, I gave you only one day’s notice. Still,
hundreds of you took the time to write and have your comments published on
the public record. This time, you have until April 26. But please don’t
procrastinate; get your comments in now. You will make a difference.
Here’s the sample letter, followed
by the mailing instructions, both email, postal and fax. Feel free to copy it
as is, or customize it as you see fit.
Dear Sir;
Thank for the opportunity to comment on
the issue of position limits for precious metals. Please establish a
speculative position limit in COMEX silver of no more than 1500 contracts. Please restrict any hedging exemptions
from those limits to legitimate hedgers. Please stop the levels of
concentration in COMEX silver futures that have been experienced over the
past few years on the short side of the market.
Sincerely,
Email – secretary@cftc.gov
Postal – Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette
Centre
1155
21st Street NW
Washington,
DC 20581
Fax - 202-418-5521
For subscription information, please go to www.butlerresearch.com
Theodore Butler
Butlerresearch.com
March 17, 2010
Theodore Butler is an independent Silver Analyst who has been
publishing unique precious metals commentaries on the internet since 1996. He
offers a subscription
service with once or twice weekly commentaries including detailed analysis of
the Commitment of Traders Report, regulatory developments, supply/demand
considerations, and topics of interest to investors in precious metals, with
an emphasis on silver. Always
outside the box. You can subscribe to his
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