In spite of 2004 and 2008 investigations determining no illegal activity in
the silver futures market, the CFTC says it has been continuing to investigate
the issue since late 2008.

 Dorothy Kosich
November 7, 2011
www.mineweb.com
RENO, NV

 The Commodity Futures Trading Commission has recently issued a one-paragraph  statement, announcing it is still pursuing an investigation into the possibility  of unlawful acts in the silver market.

 The investigation has been ongoing since September 2008. Since that time, the  commission has received a number of comments and letters asking the government  to investigate the COMEX silver futures market. Several complaints have asked  the CFTC to limit the activities of large banks in the silver market.

 "Since that time, the staff has analyzed over 100,000 documents and
interviewed dozens of witnesses and obtained expert advice," the CFTC said in a  Nov. 4, 2011, statement. "It has been a long, detailed, and thorough  investigation, and it continues in an appropriate and considered manner."

 On May 14, 2008, the CFTC said its investigation of trading activity in the  silver futures market covering the period 2005-2007 determined there was no  evidence of manipulation in the silver futures market for the period between  2005 and 2007. The investigation also found NYMEX silver prices tend to track  closely the price of physical silver. Finally, the CFTC determined "no  observable relationship between short-futures-trader concentration levels and  silver prices."

 However, in September 2008, the CFTC disclosed that another investigation of  silver markets was underway.

 For years, the CFTC has received complaints from silver investors claiming  the price of silver futures traded on the NYMEX has been manipulated  downward.

 In 2004, the CFTC issued a 2004 Silver letter in response to a large number  of metals analysts and commentators who expressed concern that the futures price  of silver was reportedly being manipulated downward as a result of reported  collusion by a handful of traders on the short end of the silver market.

 The allegation was that, because the consumption of silver had exceeded  supplies available from new production and recycling for many years, silver  futures prices should have been much higher to reflect the ongoing production  deficit.

 The CFTC staff also examined the relationship between NYMEX silver futures  prices and cash market silver prices to determine if NYMEX prices appeared to be  unusually or significantly out of line with cash prices.

 Staff analysis in 2004 found no evidence that a short-side manipulation was  in progress. The staff also concluded the gap between silver production and  consumption had been filled over the years by the drawdown of existing silver  stocks. While a production deficit existed, the staff found no supply  deficit.

 Note: "no evidence that a short-side manipulation," yet the investigation
continues.  Interesting.

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Kevin McElroy
November 1, 2010
www.seekingaplpha.com
Legendary commodity investor and hedge fund manager Jim Rogers recently pointed out that silver prices are 50% below all time highs.
He's talking about the brief momentary highs of nearly $50 an ounce back in 1980. With silver currently selling for less than $24 an ounce, Mr. Rogers is technically correct. But priced in 2010 dollars, the inflation adjusted high for silver would be closer to $124.
So if you believe that silver prices will make new inflation adjusted highs, then you're expecting to see a five-fold increase in the price of silver.
Silver has already trounced just about every other asset so far this year - it's up 40% since January 1st.

I believe that silver is due for a correction. If you've read any of my articles this week, you've heard me talk about Ben Bernanke and the upcoming Federal Open Market Committee (FOMC) meeting where he will announce the next round of Quantitative Easing.
Ben's announcement could strengthen the dollar, which would be bearish for all commodities, not just silver. As I said, silver is due for a correction.
Bernanke's announcement could be a catalyst for silver prices to drop 5-10% in the short term.
That would create an excellent buying opportunity for people like me, who are long term bullish on silver.
I'll be bullish on silver as long as the Federal Government keeps interest rates absurdly low, and as long as huge amounts of government debt is the only realistic option to keep paying for all the bells and whistles that politicians promise voters and constituents.
But there's an additional wrinkle in the silver story that I think could give silver an additional, long-term boost...
For years and years, silver prognosticators and analysts have talked about silver price manipulation. In short, the long-running conspiracy theory is that a handful of global banks have placed massive short-side bets in order to manipulate the price of silver.
Well, it's not a conspiracy theory anymore.
According to a recent story in Bloomberg,
At a hearing in Washington on Oct. 27, CFTC Commissioner Bart Chilton said there have been ‘fraudulent efforts to persuade and deviously control' silver prices and that violators should be prosecuted.
If you're not familiar with the Commodity Futures Trade Commission, they're the Federal Government body in charge of regulating and monitoring all commodity futures transactions on exchanges in the United States.
They run a pretty tight ship, so it will be surprising if they let any of the offending parties in this manipulation scandal off the hook easily. So what's the upside for manipulating silver futures contracts?
It's a little complicated, but these banks were placing phantom or "spoof" orders on silver contracts with the intention of skewing prices of options contracts.
The effect, allegedly, is that these spoof orders made some options worthless while boosting the value of other options.
In any event, these "spoof" orders had the supposed consequence of keeping silver prices artificially low.
In light of the announcement from the CFTC that they believe the price has been manipulated, I think we can see an additional boost as short-side orders are either cancelled and/or filled by the offending parties.
When you take a short side bet and you're wrong, when the options contract expires, you have to buy the security at current prices. The additional volume usually spikes the price further to the upside.
Now that the CFTC is on the case, I'll expect silver to continue to make new highs.
It still has quite a bit further to go before it hits inflation adjusted highs - but as I've been saying: wait for Bernanke's announcement next week to add to or build a position in silver.

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The big news in the financial mainstream media during the past week has been JP Morgan's announcement that they will be closing their proprietary trading desks. JP Morgan is in the process of winding down their proprietary trading operations and will be laying off their 20 proprietary commodities traders, who NIA believes could be responsible for the current concentrated short position in silver. NIA has been receiving countless emails from members asking us if this means the silver manipulation is coming to an end and what this means for the price of silver.
 
One thing is for sure, this news from JP Morgan can't be a bad thing. NIA has long held the belief that JP Morgan's manipulation of the silver market is the sole reason for the artificially high gold/silver ratio of recent years, which currently stands at 63. Silver possesses all of the same monetary qualities as gold. There is no rational reason for gold to be 63 times more expensive than silver when only 10 times more silver has been produced in world history than gold.
 
The main thing Americans will need to barter for during hyperinflation is food, but gold is too expensive to be good for bartering for food. Silver is the perfect bartering currency for food. Assuming the gold/silver ratio returns to 16 during hyperinflation and food prices increase at the same rate as gold, it will be possible to feed a family of four with only 2 to 3 ounces of silver per week. However, just 1 ounce of gold will buy 6 to 7 weeks worth of food for a family of four, and most perishable food items go bad in just a week or two.
 
The only advantage of owning gold over silver during hyperinflation will be having the ability to pick up and leave with your entire net worth in hand. The average American currently has their entire net worth tied up in their house. There is already a 12.5 month supply of Real Estate on the market. During U.S. hyperinflation, the U.S. mortgage market will come to a complete halt and it will become nearly impossible to sell your house unless you are willing to lower the price to a level where buyers can afford it without a mortgage. With the U.S. unemployment rate likely to rise above Great Depression levels, the last thing you will want during the upcoming currency crisis and societal collapse is to have your wealth stuck in Real Estate. Americans will desire the freedom and flexibility that comes with owning precious metals.
 
The U.S. median home price is currently $179,000. NIA expects Real Estate prices to fall by another 55-60% priced in gold and 90% priced in silver. For the average American who sells their $179,000 home now and uses the money to buy gold, they will have the ability to pick up their entire net worth in the form of gold bullion that weighs less than 10 pounds and move with their gold to wherever they desire. On the other hand, $179,000 worth of silver currently weighs 600 pounds and even with a gold/silver ratio of 16 would still weigh 156 pounds.
 
NIA considers silver's bartering advantage to be a lot more valuable than gold's value density advantage. Therefore, we don't see any possible way to justify a gold/silver ratio that is higher than the historical average of 16. NIA believes we are guaranteed to see the gold/silver ratio decline dramatically and if JP Morgan is going to be covering their shorts as part of their winding down of their proprietary trading division, the biggest move downward in the gold/silver ratio could come in the months ahead.
 
Is it possible that JP Morgan's plan to shut down their proprietary trading operations is just a smokescreen to make it appear as though they are complying with the new "Volcker Rule"? On July 1st, JP Morgan acquired the Metals, Oil and European Energy business lines of RBS Sempra Commodities. Also, on August 31st, JP Morgan filled their newly created role of global head of commodities strategy. These mixed signals from JP Morgan lead us to believe it is possible that JP Morgan will continue to engage in the same manipulative trading activities, but under the name of a new outside firm that they control. NIA is hopeful but skeptical that the manipulation is coming to an end. We remain cautiously optimistic at this time.
 
Bear Stearns previously held the silver short position that is now controlled by JP Morgan. The very day that Bear Stearns failed in March of 2008 was the day that silver reached its multi-decade high of $21 per ounce. Although nobody in the mainstream media has ever reported this, the real reason the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns is because Bear Stearns was losing control over the price of silver. If they were forced to cover their shorts, silver could have quickly risen to $50 per ounce. A breakout of this size in the price of silver would signal a loss of confidence in the U.S. dollar and trigger a currency crisis.
 
In just the same way that it wasn't a coincidence that silver reached its high of $21 per ounce the same day Bear Stearns failed, it might not be a coincidence that silver is now at its highest level since March of 2008 with JP Morgan claiming to be exiting proprietary trading of commodities. JP Morgan has been slowly starting to cover its silver shorts in recent months, but still holds the majority of its silver short position. In recent weeks, silver's rise has come with very low volume. JP Morgan isn't rushing to cover their shorts, but at least they aren't increasing their shorts like they normally would at this time. Now is the time that JP Morgan would normally act to slam the price of silver down. If we don't see JP Morgan make a noticeable attempt to manipulate down the price of silver within the next couple of weeks, it could be a sign that their manipulation is over.
 
The largest banks like JP Morgan control what is said in the financial mainstream media. It is sickening to us that all of the so-called financial experts who were pushing the public to buy dot-com stocks in 2000 and Real Estate in 2005, are now calling for massive deflation. This is being done solely to trick the little guy so that Wall Street as a whole can switch from being on the short side of gold and silver, to the long side. Within a year, after Wall Street has switched their positions, you will see the mainstream media begin focusing on the risk of massive inflation in our future.
 
NIA is currently producing an over one-hour long documentary about the societal collapse that is coming America. This promises to be NIA's best documentary of all time because it is based off of the thousands of warning signs that were submitted to us by NIA members. NIA intends to release this movie near the end of October. We will be providing you with further details about it in the weeks to come. If you would like your friends and family members to be the first to see NIA's new upcoming documentary, please tell them to become a member of NIA for free at http://inflation.us
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