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JP Morgan Silver Manipulation Scheme Unwinds
Posted by ironstock on Dec 14, 2010 | 2 comments
–James Turk predicts $400 silver price by 2015
Years of public pressure on the Commodity Futures Trading Commission (CFTC) from Bill Murphy and Chris Powell of Gold Anti-Trust Action committee (GATA) and Ted Butler of Butler Research to review the extraordinarily high concentration of futures shorts in the silver market has finally paid off, though the effort appeared hopeless many times along the way.
The Financial Times reports (sign-up required) that “JP Morgan has quietly reduced a large position in the U.S. silver futures market, which had been at the centre of a controversy about its impact on global prices for the precious metal.”
The FT continues: “The decision by JP Morgan was an attempt to deflect public criticism of the bank’s dealings in silver, a person familiar with the matter said. The person added that the bank’s position in silver would from now on be ‘materially smaller’ than in the past.”
Murphy, Powell and Butler led the charge to reestablish a fair playing field in the silver market, which they assert was riddled with unusually large selling activity from two major banks, JP Morgan and HSBC, in attempts to suppress the price of silver. All three men gave compelling examples, including data that showed massive short selling of silver futures by the banks on days of option expiry. In the case of Ted Butler, the quest began more than a decade ago.
But finally, a break in the complaints against the two banks emerged in September 2008 when the CFTC announced its investigation into charges of manipulation in the silver market, but the regulator declined to reveal the banks targeted in the investigation.
However, JP Morgan publicly stated: “It is absolutely incorrect to say or imply that the Nymex, CFTC or any other exchange or regulator has instructed or asked us to reduce our position.”
It wasn’t until October 2010 that a new CFTC commissioner, Bart Chilton, gave silver investors some real hope of leveling a playing field that appeared to morph more crookedly as time passed. He said there had been “fraudulent efforts” to “deviously control” the price of silver. The silver market was abuzz ever since.
In fact, many analysts close to the silver market said the scheme became too obvious to characterize the short-selling activity in the futures pits in any other way. News of lawsuits against JP Morgan and HSBC quickly spread through the Internet.
At one point this year, the CFTC Bank Participation Report indicated that a handful of banks held short positions of 30.2% of all outstanding silver contracts, with most, if not all contracts sold “naked,” or without a margin requirement to hold the position, speculates many analysts critical of JP Morgan and HSBC.
Moreover, in a speech on December 8, Chilton stated that “earlier this year, one trader held more than 40% of the silver market,” but he did not disclose the trader. It’s unknown whether the concentrated position was allowed to trade naked, as information regarding an individual trader is not disclosed, but the position size clearly raised eyebrows at the CFTC due to its infrequency in most other markets.
In reporting of an upcoming CFTC meeting in March 2010 to discuss position limits, Reuters stated: “Market participants, including commercial banks and trading houses, rarely exceed exchange position limits because of the cash margin requirements for large positions. Exchanges do not reveal customer names when position limits are hit.”
Reuters added: “Some players prefer to trade at over-the-counter markets, which are unregulated and more opaque.”
With the price of silver rising more than 70% since mid-August to reach a 30-year high of $30.68 per ounce, traders suspect JP Morgan and other banks were finally forced to begin aggressively unwinding these short positions, creating what is known as a “short squeeze.”
How long the unwinding process will take and how high the silver price will go is unknown. However, according to James Turk, founder of bullion storage service firm, goldmoney.com, the short squeeze in the silver market could be quite dramatic in its effect on the silver price.
In September, Turk said to King World News, “In the next few weeks as gold and silver rise it will be from a short squeeze the likes of which haven’t been seen since Cornelius Vanderbilt took on Daniel Drew in the legendary Erie Railroad short squeeze.”
Turk, who predicted silver would reach $30 by the end of November, was just shy of his prediction of early November by four trading days. His long-term forecast is for silver to reach $400 by 2015.
Read more: http://www.beaconequity.com/financi...on-scheme-unwinds-2-2010-12-14/#ixzz18Hz0T42u
Posted by ironstock on Dec 14, 2010 | 2 comments
–James Turk predicts $400 silver price by 2015
Years of public pressure on the Commodity Futures Trading Commission (CFTC) from Bill Murphy and Chris Powell of Gold Anti-Trust Action committee (GATA) and Ted Butler of Butler Research to review the extraordinarily high concentration of futures shorts in the silver market has finally paid off, though the effort appeared hopeless many times along the way.
The Financial Times reports (sign-up required) that “JP Morgan has quietly reduced a large position in the U.S. silver futures market, which had been at the centre of a controversy about its impact on global prices for the precious metal.”
The FT continues: “The decision by JP Morgan was an attempt to deflect public criticism of the bank’s dealings in silver, a person familiar with the matter said. The person added that the bank’s position in silver would from now on be ‘materially smaller’ than in the past.”
Murphy, Powell and Butler led the charge to reestablish a fair playing field in the silver market, which they assert was riddled with unusually large selling activity from two major banks, JP Morgan and HSBC, in attempts to suppress the price of silver. All three men gave compelling examples, including data that showed massive short selling of silver futures by the banks on days of option expiry. In the case of Ted Butler, the quest began more than a decade ago.
But finally, a break in the complaints against the two banks emerged in September 2008 when the CFTC announced its investigation into charges of manipulation in the silver market, but the regulator declined to reveal the banks targeted in the investigation.
However, JP Morgan publicly stated: “It is absolutely incorrect to say or imply that the Nymex, CFTC or any other exchange or regulator has instructed or asked us to reduce our position.”
It wasn’t until October 2010 that a new CFTC commissioner, Bart Chilton, gave silver investors some real hope of leveling a playing field that appeared to morph more crookedly as time passed. He said there had been “fraudulent efforts” to “deviously control” the price of silver. The silver market was abuzz ever since.
In fact, many analysts close to the silver market said the scheme became too obvious to characterize the short-selling activity in the futures pits in any other way. News of lawsuits against JP Morgan and HSBC quickly spread through the Internet.
At one point this year, the CFTC Bank Participation Report indicated that a handful of banks held short positions of 30.2% of all outstanding silver contracts, with most, if not all contracts sold “naked,” or without a margin requirement to hold the position, speculates many analysts critical of JP Morgan and HSBC.
Moreover, in a speech on December 8, Chilton stated that “earlier this year, one trader held more than 40% of the silver market,” but he did not disclose the trader. It’s unknown whether the concentrated position was allowed to trade naked, as information regarding an individual trader is not disclosed, but the position size clearly raised eyebrows at the CFTC due to its infrequency in most other markets.
In reporting of an upcoming CFTC meeting in March 2010 to discuss position limits, Reuters stated: “Market participants, including commercial banks and trading houses, rarely exceed exchange position limits because of the cash margin requirements for large positions. Exchanges do not reveal customer names when position limits are hit.”
Reuters added: “Some players prefer to trade at over-the-counter markets, which are unregulated and more opaque.”
With the price of silver rising more than 70% since mid-August to reach a 30-year high of $30.68 per ounce, traders suspect JP Morgan and other banks were finally forced to begin aggressively unwinding these short positions, creating what is known as a “short squeeze.”
How long the unwinding process will take and how high the silver price will go is unknown. However, according to James Turk, founder of bullion storage service firm, goldmoney.com, the short squeeze in the silver market could be quite dramatic in its effect on the silver price.
In September, Turk said to King World News, “In the next few weeks as gold and silver rise it will be from a short squeeze the likes of which haven’t been seen since Cornelius Vanderbilt took on Daniel Drew in the legendary Erie Railroad short squeeze.”
Turk, who predicted silver would reach $30 by the end of November, was just shy of his prediction of early November by four trading days. His long-term forecast is for silver to reach $400 by 2015.
Read more: http://www.beaconequity.com/financi...on-scheme-unwinds-2-2010-12-14/#ixzz18Hz0T42u
