Absolute Proof of Gold and Silver Price Manipulation, Part 2

It’s not every day that a governmental office points out market manipulation – particularly when that manipulation involves the Federal Reserve, the LBMA and two international banking giants.

This article is a companion to another recent post: Absolute Proof of Gold Price Manipulation?

It’s not every day that a governmental office points out market manipulation – particularly when that manipulation involves the Federal Reserve, the LBMA and two international banking giants. That appears to have happened in a recent report from South Carolina’s treasurer.

In the rather innocuous-sounding Proviso 89.145, the South Carolina State Treasurer’s office is advising the South Carolina General Assembly on whether or not to invest public funds in gold and silver. The short answer is the treasurer’s office thinks gold is in a bubble, but that’s not what’s interesting about Proviso 89.145. What’s interesting is the short paragraph that starts at the bottom of page 1:

Similar to other commodities, the value of gold and silver is determined by supply and demand, as well as speculation. The Federal Reserve, The London Bullion Market Association, JP Morgan Chase, and HSBC Holdings have practiced fractional-reserve banking and engaged in naked short selling causing artificial price suppression.

“This acknowledgement will eventually have profound implications on the price of silver and gold,” writes Christian Garcia at GoldSilver.com. “As awareness grows of this manipulation and the CFTC may be forced to act. We believe the price increases ahead will be mind numbing!”

Perhaps all competent state treasurers accept the fact that there’s collusion to keep the price of gold and silver down. After all, a panicked rush out of the greenback could cause the demise of the dollar (and the world’s largest economy).

Regardless of how this plays out, I’m stashing a copy of Proviso 89.145 on our server in case it “disappears” from the sc.gov site.

Like this post? Click for one of the most incredible charts we’ve ever seen in our related story: Absolute Proof of Gold Price Manipulation?

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Silver coin shortage reeks of price manipulation?

Shortages of silver coins have some on the Web wondering if dealers are holding back their stock. We don’t think they are, but we do expect more shortages to come. Here’s why.

By now, most silver investors have heard about the lawsuit against JPMorgan Chase & Co. (NYSE:JPM). A class action suit’s been pending against the bank since 2010, when a large group of investors accused JPM of taking out enormous short positions in the silver futures market. The move was allegedly a bid to manipulate silver prices (see our post Silver price manipulation case narrows in on JPMorgan; drops HSBC for more).

Interestingly, there are rumors floating around the Web that some silver coin sellers could be doing their own form of silver price manipulation: namely, refusing to sell coins in the face of lower silver prices.

“I visited three very reputable distributors today – AMPEX, Gainesville and Northwest Territorial Mint – and all three of these dealers were mysteriously out of stock on one-ounce silver coins,” writes George Maniere at Market Oracle. “I can only conclude that they are willing to sit on them until the price of silver goes back up.”

Even the U.S. Mint got in the action, halting orders for sets of un-circulated American Silver Eagles (see our post Expect volatility on the path to higher silver prices in 2012 for more) because they can’t stock the necessary blanks to make the coins.

Everything’s in flux right now. We’re going through what the Financial Times calls “the biggest swings in precious metals since the collapse of Lehman.” According to the same article, though, gold and silver coin sales hit all-time sales records on Thursday (Oct. 22), Friday (Oct. 23) and Monday (Oct. 26).

That left the shelves at silver coin dealers empty. Demand for industrial precious metals may be falling, but it’s actually rising in the physical markets on bargain-hunting. That means a whole lot of investors see the recent drop in gold and silver prices for what it is: a rough patch in a decade-long bull market for precious metals.

“Buying in the retail market … it’s just huge right now,” Jim Puplava, the host of Financial Sense Newshour, said on Saturday. “They drive the price down, and it’s like Nordstrom is having a 20-30 percent off sale.”

While it may seem strange that coin dealers run out silver as soon as prices dip, it’s probably not manipulation and refusal to sell silver coins, but rather that a tidal wave of buyers have moved in to capitalize on lower prices. Even the popular Sprott Physical Silver Trust ETV (NYSE:PSLV) announced a week ago that it’d run out of silver and needed to replenish its supply.

“I think investors are really smart,” Kathy Derbes of KDerbes Precious Metals LLC told Mr. Puplava. “They know what’s going on. They understand that these price breaks – particularly this time around – are not telling us anything about the fundamentals of gold and silver. In fact, I think the reasons for owning it have gotten a lot stronger.”

Derbes adds that current orders for her clients have a two to three week delay before they’re shipped, and she doesn’t expect that to change. If anything, the delay could increase.

“We’re probably in the beginning stages of what could be shortages,” she said. “We have to remember that it’s a market that can’t be printed into existence like all the paper currencies. We have to wait for the mints to catch up.”

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Silver price manipulation case narrows in on JPMorgan; drops HSBC for now

The media tends to brush off reports of manipulation in the silver market. Hopefully, this lawsuit will change that.

A new wrinkle in the silver price manipulation lawsuit against JPMorgan Chase & Co. (NYSE:JPM) has dropped the spotlight off HSBC Holdings PLC (NYSE:HBC) for now. The fresh lawsuit amendment, which was filed last Tuesday, now names JPMorgan as the sole defendant in the case (per the Wall Street Journal).

Here’s what we know: a lawsuit filed by individual silver investors alleged that JPMorgan and HSBC amassed massive short positions in silver futures between 2008 and 2010, then reaped the rewards as silver prices declined in the face of the large short positions. The new move drops allegations against HSBC, as investors have entered into a tolling agreement with the London bank.

Tolling agreements give both sides in the case time to negotiate a settlement. Should those talks crumble, HSBC could be re-added to the lawsuit. A tolling agreement certainly isn’t an admission of guilt on HSBC’s part, but it’s a clear signal that they don’t want to go to trial (perhaps to avoid the massive legal fees, the bad press, or because they fear they’d be on the losing side of the case). What bothers me about the agreement is the fact that we may never know whether HSBC was truly involved in attempting to manipulate the price of silver – especially if JPMorgan enters into a similar agreement in the future.

New numbers in the amended lawsuit allege that JPMorgan’s shorts pushed silver prices down 12 percent in a single day – a move that, if true, made the bank $220 million.

All told, more than 43 separate silver price manipulation lawsuits were filed against JPMorgan and HSBC (per Reuters). Those lawsuits were eventually combined into a class action lawsuit.

“The complaint alleges that HSBC and J.P. Morgan made large, coordinated trades, among other things, to artificially lower the price of silver at key times when the precious metal should have been trading at higher levels,” the law firm Girard Gibbs LLP writes on its web site. “By depressing the price of silver, the class action alleges that the defendants made substantial illegal profits while harming investors and restraining competition in the COMEX silver futures market.”

Due to it’s small size and relative lack of liquidity, the silver market has often been the target of price manipulation (see my post Silver Thursday, the Hunt Brothers, and the collapse of a precious metal for more). But there’s also a tendency for the media to brush off reports of manipulation in any markets – particularly emotionally-charged markets like precious metals. This lawsuit could help bring visibility to a problem that’s lost a lot of money for a lot of people. Let’s just hope it makes it to trial.

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