Those spivvy short-sellers are at it again, this time in silver, the Asbo of the precious metal family. That is, worth about 1/67th of a jail sentence the price of gold.
To be fair, silver bugs (like gold bugs) have been pointing their fingers at a short-selling conspiracy for some time. Unlike the SEC and FSA of course, who only seem to have woken up to the tactic recently.
The silver conspiracists are very serious too. Check out this editorial written by Alan Lunt for Gold Eagle in 2004:
I am inclined to think that the battle for silver could be the beginning of the end of the fiat money fractional reserve banking system, as we know it….It has been an experiment in unregulated greed perpetrated on society by the banks under the guise of ‘helping’ the economy to grow.
Replace “battle for silver” with “naked short-sellers” and you have a Daily Mirror story right there.
Well, the silver conspiracists are getting what they wanted. The WSJ reports that the Commodities Futures Trading Commission has started an investigation into short positions on the silver market. Curiously though, they’re starting out with a conclusion and working backwards from there (presumably):
The CFTC isn’t yet convinced there’s systemic wrongdoing and in May published a report saying as much. But the agency decided to take a fresh look, in part to show critics that it checks out complaints, and also to make sure there isn’t something new to uncover…
Silver investors have argued that a handful of U.S. banks have been controlling a large portion of silver’s short positions — or bets that prices will decline — on Comex division of the New York Mercantile Exchange. Official data from the CFTC showed that two U.S. banks had increased short positions in the silver futures market between July and August by 450% and controlled 25% of the total open interest.
‘The proof that this selloff was criminal lies in public data,’ wrote Theodore Butler of Cape Elizabeth, Maine, in August in a silver newsletter. ‘The concentrated sale of such quantities in such a short time’ caused silver’s fall, wrote Mr. Butler, who for many years has been vocal about purported silver-market manipulation. In September he reiterated to readers that they should email the CFTC.
The CFTC had argued in May that the large banks that people assailed for manipulating the market were instead acting appropriately as market makers, who take on futures positions to offset their exposure in over-the-counter markets. Therefore, these traders aren’t ‘naked shorts’ and won’t benefit from long-term depressed silver prices. Many analysts agree with the agency’s conclusion.
To hear more of the silver bears’ side of the story, in video form, click here. More of Butler’s stuff here.