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The silver
market is one of those puzzles that continues to challenge our understanding
of free market concepts because it is MASSIVELY volatile for such a stable
supply/demand dynamic. When was the last time you heard of a gigantic silver discovery
that would drastically increase the supply of silver? Or a new manufacturing
technology that will replace the ever increasing demand for industrial
silver? Let me save you some time...you have never heard of any drastic
changes in the supply/demand equation. So why are silver prices so volatile
when everything else related to physical silver isn't?
Taking a deep
look at the details of COMEX silver trading can be very illuminating as to
why but when you understand what is really going on... it is downright
infuriating! I've put together a rare glimpse into what REALLY happens when
buyers and sellers get together to make a market in silver on the COMEX. I
hope you are sitting down because this covers just 5 MINUTES of a ordinary
trading day...
September 1,
2010: COMEX silver traded sideways almost all day. This
is predictable as there was no earth shattering news of a huge discovery or
massive industrial purchase coming out of the mainstream media. Other than a
brief spike up to 19.535 at 8:38:07 (likely people were trying to make a run
at the highs in both gold and silver) the market was drifting down a bit, and
traded in a tight range between 19.35 and 19.40. Ho hum.
Suddenly, the
trading action changed dramatically. Starting at 13:20:00 (5 minutes before
the COMEX floor close in silver), someone started to press the market down,
and they in fact got a print at the low of the day at 19.32. To accomplish
this they had to sell 215 contracts. Did someone panic OR was this a
manipulation of the price lower (which is illegal)?
Then, turning on
a dime at 13:22:30 (2.5 minutes before the COMEX floor closed), they started
buying all available liquidity. At this time of day (final two minutes), the
market participants and market makers are the most active. It's the highest
liquidity in the day. So, they started buying all they could, and drove the
price quickly back up to 19.40. They didn't go above that price. They just
bought all they could for the final 2.5 minutes, gingerly, not wanting to
rally above 19.40. In the end they had bought 853 contracts.
When the dust
settled they basically were able to buy a net 638 contracts in the final 5
minutes of COMEX silver trading, without causing a price rise. They were able
to do this, since they knew when the potential liquidity would be the largest
of the day, and they started with a head-fake down move, to get extra
sellers. If they had simply started buying, they would have created a much
larger price rally.
This "play
by play" account really shows the nuts and bolts of manipulation as it
happens. When you equate this to physical silver the numbers are staggering.
This was basically a paper dump of 1,075,000 oz of silver to rig the price
lower hitting stop losses and the clueless panickers only to buy back
4,265,000 oz of silver within minutes. The net effect... 3,190,000 oz of
silver bought ALL IN 5 MINUTES WITHOUT EFFECTING THE PRICE OF THE METAL!
They are clever
crooks but they are crooks none the less. I think this also shows that
someone really is trying to buy (or cover shorts) as best they can, without
pushing the price up too quickly. The likely culprit is our friends over at
JP Morgan. They probably didn't even reduce open interest. Just passed the
"hot potato" short positions to someone else. Mostly market makers
or maybe even others they collude with to hide the gigantic short position.
As JPM appears to
be working hard to thin their position, the shorts are being spread around
(since the open interest hasn't contracted). Since most folks don't have
exceedingly deep pockets (other than huge banks), they don't have an appetite
for big losses. As such, they will likely add to the buying frenzy a lot
faster than JPM would have when we take out key levels on the upside.
Many professional
traders might say this is just "smart trading" but there is a
fundamental problem here. These gigantic trades are not representative of the
underlying physical market in silver! There is a massive physical silver
shortage in the world and having the CFTC sit back and watch as millions of
ounces trade hands in a matter of minutes is outrageous. I'm not saying that
someone shouldn't buy 4M oz of silver in 2 minutes BUT to do it in a way that
is manipulative to the price of silver is ILLEGAL any way you slice it.
It seems that
although the CFTC gained new powers to oversee the silver market and stop the
manipulation...they are reluctant to use them. Here is Bart Chilton talking
about the NEW laws that prohibit "disruptive trading practices".
http://www.youtube.com/watch?v=K1_q88rlUkw&am...player_embedded
3:40 "The
last thing I wanted to mention is this thing called "disruptive trading
practices'"
3:50 "When I
say manipulation standard I mean going after these folks who try to push
around these markets to make a buck for themselves or their company"
4:12 "It
gives us the authority to go after manipulation and manipulation like
practices. These disruptive trading practices. It will allow us to put folks
in jail, it will allow us to find them and it will make this market
better."
As you can see
from the trading analysis above nothing has changed when it comes to
"business as usual" on the COMEX silver trading floor.
Come on
Bart...TIME TO DO YOUR JOB!!!
In the mean time
the US is in final preparations to return to a new gold standard target="_blank"(http://www.roadtoroota.com/public/350.cfm)
and from my analysis we should see it happen before the end of THIS year.
As for the future
of Silver trading on the "CRIMEX"...let's just say there won't be a
lot of happy people when they try to cash in their COMEX paper for physical
silver. Caveat Emptor!
May the Road you
Choose be the Right Road.
Bix
Weir
Bix Weir is a freelance author and analyst dedicated
to exposing the long term manipulation of the gold and silver markets. He has
worked closely with the Gold Anti-Trust Action Committee helping to pull the
curtain away from the Cabal of International Bankers that have taken control
of our free market system.
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