State Dept. cable confirms gold futures market was created for price suppression

It's not a conspiracy theory.  It's a conspiracy fact.

The U.S. gold futures market was created in December 1974 as a result of collusion between the U.S. government and gold dealers in London to facilitate volatility in gold prices and thereby discourage gold ownership by U.S. citizens, according to a State Department cable written that month, obtained by Wikileaks, and disclosed today by the TF Metals Report:

http://gata.org/node/17081

Lars Schall interviews Jesse of Cafe Americain about gold and silver price suppression

http://www.gata.org/node/13065

Confiscation, Price Suppression & The True Gold & Silver Price

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/12/4_Confiscation%2C_Price_Suppression_%26_The_True_Gold_%26_Silver_Price.html

Turk - Gold Shortage Forcing Drastic Steps By Central Planners

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/11/27_Turk_-_Gold_Shortage_Forcing_Drastic_Steps_By_Central_Planners.html

Jeff Nielson: Silver's smoking guns of price suppression

This is brilliant analysis by Jeff Nielson on price suppression of silver.

Silver’s Smoking Guns, Part I: Mining Paradox

Silver’s Smoking Guns, Part II: Investment Paradox

Silver’s Smoking Guns, Part III: Market Paradox

 

Guest Post: Price Suppression Mechanics of GLD and SLV, by Andrew Maguire

http://www.tfmetalsreport.com/blog/4327/guest-post-price-suppression-mecanics-gld-and-slv-andrew-maguire

Silver and gold options expiry and delivery

The cat's out of the bag.  Thanks to BORG members Eric and Robert for finding these articles.

http://seekingalpha.com/article/260168-gold-and-silver-options-expiry-march-28-2011-expect-volatility?source=article_sb_exclusives_2

http://seekingalpha.com/article/260205-slv-holdings-reach-record-high?source=qp_article

http://seekingalpha.com/article/259549-will-jpmorgan-now-make-and-take-delivery-of-its-own-silver-shorts

http://seekingalpha.com/article/260171-did-ubs-mislead-small-investors-about-stored-silver?source=yahoo

And finally, this oldie and goodie which I read last year:

http://www.marketoracle.co.uk/Article20677.html

A Conspiracy With a Silver Lining

I am printing the full content in case the link is taken down.

http://opinionator.blogs.nytimes.com/2011/03/02/a-conspiracy-with-a-silver-lining/?hp

As Americans know all too well by this point, commodity prices — for corn, wheat, soybeans, crude oil, gold and even farmland — have been going through the roof for what seems like forever. There are many causes, primarily supply and demand pressures driven by fears about the unrest in the Middle East, the rise of consumerism in China and India, and the Fed’s $600 billion campaign to increase the money supply.

Nonetheless, how to explain the price of silver? In the past six months, the value of the precious metal has increased nearly 80 percent, to more than $34 an ounce from around $19 an ounce. In the last month alone, its price has increased nearly 23 percent. This kind of price action in the silver market is reminiscent of the fortune-busting, roller-coaster ride enjoyed by the Hunt Brothers, Nelson Bunker and William Herbert, back in 1970s and early 1980s when they tried unsuccessfully to corner the market. When the Hunts started buying silver in 1973, the price of the metal was $1.95 an ounce. By early 1980, the brothers had driven the price up to $54 an ounce before the Federal Reserve intervened, changed the rules on speculative silver investments and the price plunged. The brothers later declared bankruptcy.

Accusations that JPMorganChase and HSBC allegedly manipulated precious metal markets are worth looking into.

The Hunts may be gone from the market, but there are still plenty of people suspicious about the trading in silver, and now they have the Web to explore and to expand their conspiracy narratives. This time around — according to bloggers and commenters on sites with names like Silverseek, 321Gold and Seeking Alpha — silver shot up in price after a whistleblower exposed an alleged conspiracy to keep the price artificially low despite the inflationary pressure of the Fed’s cheap money policy. (Some even suspect that the Fed itself was behind the effort to keep silver prices low, as a way to keep the dollar’s value artificially high.) Trying to unravel the mysterious rise in silver’s price is a conspiracy theorist’s dream, replete with powerful bankers, informants, suspicious car accidents and a now a squeeze on short sellers. Most intriguingly, however, much of the speculation seems highly plausible.

The gist goes something like this: When JPMorgan Chase bought Bear Stearns in March 2008, it inherited Bear Stearns’ large bet that the price of silver would fall. Over time, it added to that bet, and then the international bank HSBC got into the market heavily on the bear side as well. These actions “artificially depressed the price of silver dramatically downward,” according to a class-action lawsuit initiated by a Florida futures trader and filed against both banks in November in federal court in the Southern District of New York.

“The conspiracy and scheme was enormously successful, netting the defendants substantial illegal profits” in the billions of dollars between June 2008 and March 2010, according to the suit. The suit claims that JPMorgan and HSBC together “controlled over 85 percent the commercial net short positions” in silvers futures contracts at Comex, a Chicago-based exchange on which silver is traded, along with “25 percent of all open interest short positions” and a “a market share in excess of 9o percent of all precious metals derivative contracts, excluding gold.”

In the United States, trading in precious metals and other commodities is regulated and closely monitored by a federal agency, the Commodity Futures Trading Commission. In September 2008, after receiving hundreds of complaints that silver future prices were being manipulated downward by JPMorgan and HSBC, the commission’s enforcement division started an investigation. In November 2009, an informant, described in the law suit only as a former employee of Goldman Sachs and a 40-year industry veteran, approached the commission with tales of how the silver traders at JPMorgan were bragging about all the money they were making “as a result of the manipulation,” which entailed “flooding the market” with “short positions” every time the price of silver started to creep upward. The idea was that by unloading its short positions like a time-released capsule, JPMorgan’s traders were keeping the price of silver artificially low.

Soon enough, the informant was identified as Andrew Maguire, an independent precious metals trader in London. On Jan. 26, 2010, Maguire sent Bart Chilton, a member of the futures trading commission, an e-mail urging him to look into the silver trading that day. “It was a good example of how a single seller, when they hold such a concentrated position in the very small silver market can instigate a sell off at will,” Maguire wrote.

On Feb. 3, 2010, Maguire gave the futures trading commission word about an impending “manipulation event” that he said would occur two days later, when the Labor Department’s non-farm payroll numbers would be released. He then spelled out two trading scenarios about which he had been told. “Both scenarios will spell an attempt by the two main short holders” — JPMorganChase and HSBC — “to illegally drive the market down and reap very large profits,” Maguire wrote in an e-mail to a trading-commission investigator.

On Feb. 5, Maguire took a victory lap, writing in another e-mail to the trading commission that “silver manipulation was a great success and played out EXACTLY to plan as predicted.” He added, “I hope you took note of how and who added the short sales (I certainly have a copy) and I am certain you will find it is the same concentrated shorts who have been in full control since JPM took over the Bear Stearns position … I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC’s allowing by your own definition an illegal concentrated and manipulative position to continue.”

In March 2010, Maguire released his e-mails publicly, in part because he felt the trading commission’s enforcement arm was not taking swift enough action. He was also unhappy over not being invited to a commission hearing on position limits scheduled for March 25. Then came the cloak and dagger element: the day after the hearing, Maguire was involved in a bizarre car accident in London. As he was at a gas station, a car came out of a side street and barreled into his car and two others; London police, using helicopters and chase cars, eventually nabbed the hit-and-run driver. Reports that the perpetrator was given a slap on the wrist inflamed the online crowds that had become captivated by Maguire’s odd story.

In any case, the class-action lawsuit contends that between March 2010 and November 2010, JPMorgan Chase and HSBC reduced their short positions in the silver market by 30 percent, causing the metal’s price to rise dramatically, but leaving them still with a large short position. Now, with the value of silver rising nearly every day, the two banks are caught in a “massive short squeeze,” according to one market participant, that appears to be costing them the billions they made originally plus billions more. Whether these huge losses will show up on the books of JPMorgan Chase and HSBC remains to be seen. (Parsing through the publicly filed footnotes of derivative trades is no easy task.)

Nonetheless, the conspiracy-minded have claimed that the Fed must have somehow agreed to make JPMorgan and HSBC whole for any losses the banks suffered if and when the price of silver rose above the artificially maintained low levels — as in right now, for instance. (About all this, a JPMorganChase spokesman declined to comment.)

Some two-and-a-half years later, the Commodity Futures Trading Commission’s investigation is still unresolved, and at least one commissioner — Bart Chilton — thinks that after interviewing more than 32 people and reviewing more than 40,000 documents, there has been enough investigating and not enough prosecuting. “More than two years ago, the agency began an investigation into silver markets,” Chilton said at a commission hearing last October. “I have been urging the agency to say something on the matter for months … I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.”

What’s more, Chilton said in an interview last week, that “one participant” in the silver market still controlled 35 percent of the silver market as recently as a few months ago, “enough to move prices,” he said, and well above the 10 percent “position limits” the commission has proposed to comply with Dodd-Frank financial reform law. Since that law’s passage last summer, the commodities exchanges have issued waivers permitting the ownership of silver positions above the limits the C.F.T.C. has proposed, and which were supposed to be in place by January of this year. Yet the waivers remain in place, and the big traders have not been penalized, much to Chilton’s frustration And the mystery deepens: last Thursday, the price of silver fell $1.50 per ounce in less than an hour before recovering. “This was robbery at its most obvious and most vindictive,” wrote Richard Guthrie, a London-based trader, in an e-mail to Chilton. “How many investors lost money and positions to the financial benefit of an elite few?”

It’s getting harder and harder to continue to brush off Andrew Maguire’s claims as the rantings of a rogue trader with a nutty online following. The Commodities Futures Trading Commission should immediately release the files from its investigation into the supposed manipulation of the silver market so the public can determine whether JPMorganChase and HSBC did anything illegal, with or without the help of the Fed. In addition, the commission should start enforcing the 10 percent threshold on silver positions it has proposed to comply with Dodd-Frank law. Basically, the other commissioners must join with Bart Chilton to do the job they are required to do: Protecting the sanctity of the markets and preventing the sorts of manipulation we’ve seen all too often.

Speak Up and Be Heard

http://news.silverseek.com/SilverSeek/1298557244.php

If The CME Hiked Gold And Silver Margins By 50% And Nobody Cared, Did A Tree Fall In The Precious Metal Price Suppression Scheme?

Exchanges raising margin requirements usually tank the markets in question.  No such luck for the silver and gold shorts.

http://www.zerohedge.com/article/if-cme-hikes-gold-and-silver-margins-50-and-nobody-cared-did-tree-fall-central-banking-pm-pr

Now that JPM is out of the picture, the last recourse of gold and silver price suppression is exchange margin hikes. Or was. The CME has announced, that as of close today, it will hike various gold and silver (and other metal) contract initial and maintenance margins by 50%.... And nobody cared. This means the CBs are well on their way to losing the imposed gold standard wars.

Class action against Morgan, HSBC specifies silver manipulation mechanism

http://news.silverseek.com/SilverSeek/1293546686.php

"Before the Class Period began, JPMorgan had become the custodian and an authorized participant of the largest known concentration of silver bars, the iShares Silver ETF, which holds in excess of 340 million troy ounces of silver, a sum that equals an estimated 1/3 of the total present global supply of silver bullion. As a result, it had actual knowledge of the precise whereabouts of much of the world's known silver bar supply.

"In approximately March 2008, JP Morgan acquired Bear Stearns, which held a very large short position in silver. With more of the total short position in silver concentrated in the hands of JP Morgan, it had a further motive to suppress prices.

"Upon information and belief, JP Morgan works together with HSBC, the other dominant player in the silver and precious metals markets. In July 2009, HSBC became the custodian of the SIVR ETF, which meant that it had physical access to and knowledge of the silver held by that trust. Notably, it named JP Morgan as one of the sub-custodians of the SIVR ETF.

"As a result of their participation in the silver ETFs, JP Morgan and HSBC had a direct opportunity to confer and discuss with each other the prices of silver held by each of them.

"In addition, Defendants had a strong incentive to suppress downward the price of silver as measured by the NYSE-Arca and CME/COMEX instruments. For example, Defendants could pledge their silver to the ETFs in exchange for ETF shares, sell their shares to other market participants, drive down the prices of silver through trades on NYSE-Arca and CME/COMEX, buy back their ETF shares from investors at lower prices, and return their (now lower-priced) silver ETF shares in exchange for the silver bars initially pledged against those shares, the real value of which remained the same, and only notionally appears lower because of Defendants' suppression.

Kaplan Fox Sues JP Morgan and HSBC on Behalf of Investors for Silver Futures and Options Contract Losses Caused by Market Manipulation

The lawsuits against JPMorgan and HSBC for the suppression of silver prices are mounting. There is no one else to thwart aggressive buyers. Shorts are being taken to the wood shed. This couldn't happen to a better lot.

http://www.marketwire.com/press-release/Kaplan-Fox-Sues-JP-Morgan-HSBC-on-Behalf-Investors-Silver-Futures-Options-Contract-Losses-1347390.htm

Silver manipulation lawsuit

I recommend reading the first five pages of this silver manipulation lawsuit to get a good understanding of the alleged manipulation by the bullion banks.

http://www.gata.org/files/SilverManipulationLawsuit-10-27-2010.pdf

CFTC raises alarm about silver market

Where are all my detractors now? I've been harping on illegal price suppression schemes by the large bullion banks for years, to an audience who generally dismissed me as a conspiracy theorist. This may cause the price of silver to soar even more now that the commercial shorts have to cover their shorts--and their tracks. I'm going to guess they'll get a slap on the wrist (i.e. a fine with no admission of guilt) since they're doing it on behalf of the Fed--even if the CFTC enforces its position limits.

Either way, manipulation only works--until it stops working. The horses have left the barn. Silver, bitchez!

http://www.reuters.com/article/idUSWALQLE6QE20101026?loomia_ow=t0:s0:a49:g43:r1:c0.353211:b38714236:z0

Concentration of short positions at the COMEX

Click on chart to enlarge.

The concentration of short positions in COMEX gold and silver among a few bullion banks suggests price suppression and manipulation.

Ben Davies on gold

One of the best interviews on gold on CNBC, of all networks. Bravo.

http://www.cnbc.com/id/15840232?play=1&video=1552984313

LBMA shuts down bullion bank trading data

http://www.zerohedge.com/article/lbma-closes-public-access-key-bullion-bank-trading-data

GATA's Adrian Douglas (recently famous for facilitating the emergence of whistleblower Andrew Maguire) seems to think so, after his observation that the LBMA has decided to block "access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members." His conclusion: "There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast."

Investors could have been blindsided by the events of 2008, but anyone who misses the writing on the wall about what's going on in the bullion markets is just foolish. The bullion banks have sold far more metal than they can deliver, and more and more customers are asking them to deliver. This has led to back-door bailouts and cover-ups.

Anyone who has "unallocated" bullion should be very concerned. The LBMA itself describes owners of "unallocated bullion" accounts as "unsecured creditors." That means that the account holder has no collateral or title to any bullion.

Bullion bank unallocated account agreements require the bank only to settle in cash for non-performance. That means when the physical squeeze that is evolving takes gold and silver prices to multiples of the current price, holders of unallocated metal accounts will not get any bullion, nor will they be compensated at the prevailing market price.

CFTC and financial regulation reform

If CFTC Commissioner Bart Chilton is correct, position limits will be imposed and enforced for derivatives trading on commodities in the COMEX Exchange. Let's see if they enforce these new laws in the precious metals pits, forcing the big bullion banks (JPMorgan Chase and HSBC) to unwind their huge naked short positions.

I'm still wary of Commissioner Chilton's enthusiasm because CFTC Chairman Gary Gensler has talked a good game, but has been slow to respond to complaints of price manipulation. He's also a former executive at Goldman Sachs. Having said that, his predecessors were asleep at the wheel for decades--probably complicit in the price suppression schemes of gold and silver, so at least his acknowledgment that futures markets need more scrutiny against price manipulation is somewhat encouraging.



http://www.youtube.com/watch?v=K1_q88rlUkw

Proof of gold price suppression

http://www.zerohedge.com/sites/default/files/Proof%20of%20Gold%20Price%20Suppresion.pdf

That suppression comes from trading on a net basis 45 ounces of gold for every ounce of real gold. In other words 44 ounces of paper gold are traded for each ounce of physical gold. This bogus increase in gold supply distorts the price such that it does not move in lock step with M3 but instead it moves in lock step with the amount of paper gold that is created out of thin air.

Each 44 ozs of paper gold are only backed by 1 oz of real gold but if holders of paper gold demand real gold then each 44 ozs of paper gold will need to be met with 44 ozs of physical gold and not just with one ounce; this will cause a run on the bullion banks. The price will increase and its final limit will be the price related to only real physical gold.

Conclusions

The inescapable conclusions are:

1) The gold price is suppressed through fractional reserve bullion banking

2) The gold market is selling on average 45 ounces of gold for every one ounce of real physical gold via “unallocated gold” (fractional reserve bullion banking). In other words the gold market is backed by only 2.3% gold

3) The true price of physical gold is currently around $54,000/oz if fractional reserve bullion banking did not exist. In the presence of fractional reserve banking with 2.3% gold backing the market price of “gold” is reduced to $1200/oz

4) The US dollar has a purchasing power that is 45 times over valued

5) The way to end gold price suppression is for investors to ensure they have allocated physical bullion preferably held outside of the bullion banking system

The Trade of the Century

The sick joke of the Gold cartel is that whether you hold dollars or unallocated gold you only have 2.3% of gold backing! However, the trade of the century is to buy actual physical metal with your dollars, or if you have unallocated gold to demand physical delivery. In this way you can trade something with 2.3% gold backing for an investment that is 100% gold.

Naked shorting of precious metals

This is my take on how bullion banks naked short sell gold and silver bullion. First one has to understand the difference between a short sale and a naked short sale.

A short sale is perfectly legal and desirable, as every transaction has two counterparties: a buyer and a seller. Hence, short selling provides liquidity to markets. The mechanism involves a short seller borrowing the assets (e.g. shares of a company, gold bullion, bonds, etc.), selling that asset at a determined price, and hoping the value of the asset declines, so the seller can buy it back at a lower price, profiting from the difference between the higher sales price and the lower purchasing price. It's identical to a buyer who goes "long" an asset: the buyer buys an asset, hopefully at a lower price, watches the asset value increase, and sells it at a higher price, profiting from the higher sales price. A short seller executes the same buy/sell transactions--only in different time sequence. A short seller sells the borrowed asset before buying it back (covering). Another difference is that the short seller has to pay interest for the borrowed asset, until the buyer covers his short position with the purchase.

Of course, not all long and short positions are profitable. If a long buys a stock at $10/share, and ends up selling at $8, the long position has a net loss of $2/share. Likewise, if a seller shorts a stock at $10, and the price rises to $12, the loss is again $2, plus the cost of interest for the borrowed shares. A long or short position is a directional bet: a long expects the asset value to rise in price, and a short expects the value to decline in price.

Naked short selling is contentious, and illegal in most markets, on par with fraud. A naked seller never borrowed the asset, never took possession, and hence, doesn't pay interest. It's particularly onerous because the asset doesn't exist, and therefore an infinite amount can be created out of thin air. For instance, phantom shares of a company can be created--and thus shorted, driving the shares of a company down, sometimes to zero. This is exactly what happens in a bear raid when there's a concerted effort from multiple parties betting against shares of a company, debt of a sovereign country (e.g. Greece), or precious metals.

With gold and silver, a few bullion banks borrow gold from a central bank (e.g. the Federal Reserve Bank) at the gold lease rate, sells the gold for cash, and lends out the cash at a higher rate, say the LIBOR. The bullion bank pockets the difference between the higher LIBOR rate and the gold lease rate, the so-called Gold Forward Offered Rate (GOFO). And since they are short gold, they also profit when the price of gold declines. Hence, the bullion banks have another motivation to see falling prices for precious metals, as they have huge short positions in gold and silver. Also, the concentration of a few bullion banks who have large net short positions allows them to manipulate prices lower, especially when they work in concert. This is what gold bugs have been complaining to the CFTC for years, and why the Department of Justice is finally investigating these anti-competitive practices.

What this investigation should expose is that these gold leases and sales are not backed by physical inventory, and hence are "naked." This price suppression scheme is fraudulent, and it's allegedly being carried out by the Fed, US Treasury, other foreign central banks, and a group of bullion banks, most notably JPMorgan Chase. A few years ago, Morgan Stanley was ordered to pay a fine when they fraudulently charged customers custodial fees for storing gold that never existed in their vaults. Many are questioning not only the existence of gold in the vaults of bullion banks, but also the ETF's, the futures exchanges (e.g. COMEX), and central banks themselves. It could be another reason why the Fed has resisted audits, which Ron Paul has pushed for with legislation. Ft. Knox has not had an independent audit of its vaults since 1953! Who knows how much gold there is in vaults worldwide, because the authorities certainly won't allow verification.

Why is this important to anybody--other than a few gold and silver bugs? Firstly, central banks artificially suppress precious metals prices to hide their reckless printing of paper currencies. After all, politicians have to fund entitlement programs--even if a country is bankrupt. A rising gold price exposes monetary inflation, simultaneously signaling currency debasement. Monetary inflation is a hidden tax on the citizens; a slow, grinding decline in a nation's standard of living. Until it reaches hyperinflation, when a sudden currency crisis becomes obvious to all. Gold is a fear indicator, and an inverse proxy for confidence in a government's finances--and currency.

In a fiat, fractional reserve currency financial system, banks and central banks have a vested interest in maintaining confidence in the status quo. If confidence is lost in our banking system, there would be a run on every bank, as all depositors would demand their deposits immediately. Well-capitalized banks take $1 of deposit, and lend that same dollar out to 10 other borrowers. Under-capitalized banks (highly leveraged banks) may loan that same dollar out to 40 or more other borrowers. Clearly, if every depositor wanted their money bank, every bank would be declared insolvent, unable to honor the 90+% of other depositors.

With the explosion of precious metals ETF's (which trade like a stock) allegedly backed by gold or silver, paper trading in the precious metals futures exchanges, and gold swaps and leases, it is speculated that the ratio of gold paper claims vs. physical gold above ground is 100:1. In other words, 99 out of 100 parties who believe they have claim to gold bullion do not own it at all. And if there's a run on physical gold, many "owners" of gold assets will be disappointed, much like many depositors would be disappointed (or angry) if there was a run on banks.

Another reason for concern is since the prices of precious metals have been suppressed for years, mining for them has been uneconomic. Many mines have been closed as a result in order to stem losses, further compounding the physical shortage. And since silver is also an industrial metal, in addition to being an investment and used for jewelry, when the shortage occurs, the severe crunch will cause prices to soar, while shutting down manufacturing lines. This has severe economic and national security implications, since silver is used in many high-tech, biotech, cleantech, and military applications.

The short-term profits of a few banks and their central banking cohorts will ultimately doom the long-term prospects of a global economy. This is why many mainstream financial pundits are starting to sound the alarm bell on what could be the biggest financial fraud in the history or mankind: the big NAKED short of gold and silver.

See disclaimer in side bar.

Disclosure: long physical gold and silver, long precious metals mining shares.