Saturday, May 7, 2011

Was the Silver Market Manipulated Downward?

In the EPJ Daily Alert of March 7 , I wrote with regard to whether markets are manipulated:
It happens, but it is not an everyday occurrence.

As far as silver is concerned, I have no idea if major players are "hopelessly short". I doubt it. However, if they are, a bunch of bloggers are not going to out game a bunch of insiders. Not going to happen. In such a situation, insiders would change the rules (ask the Hunt Brothers) and do whatever is necessary to crash the metal.

My thinking though is that it is a lot of small fry ganging up on supposed short-sellers caught in a non-existent squeeze.

How long can these small fry pile on? A long, long time. If the Fed is pumping money, it can go on until the Fed stops printing money. The current slowed money printing means we may be near that junction. Cotton, for example, was limit down today.
So what should long term holders of silver do? They should do nothing. It's too dangerous, to try and trade out of short- and medium- term moves and end up missing the major upward spikes. Thus, for long term holders I say grin and bear any downside activity

In the long-term, I think gold and silver will climb beyond your wildest dreams.
On March 8 in the Alert, I wrote:
I seriously doubt there has been a 30 year manipulation of the silver market. I remain long term bullish on silver because I believe at some point the Fed will print money at record rates that will get into the system, which will be very price inflationary. In the short-term things are as tricky for silver as they are for the stock market, since price action will depend on how much money gets into the system short-term. If there isn't much, stocks and silver will head down short term.

The silver conspiracy theorists will call it some kind of bear market raid if silver goes down, but to me it will simply look like market forces.
Now that the silver market has crashed, I have no reason to change my mind. The long-term outlook for silver is very bullish---because the Fed is likely to accelerate money printing and silver will be sought after as an alternative money (just like gold). It will be viewed as a hedge against inflation.

In the short-term, silver will remain volatile. Strong spikes up will be followed by strong downward corrections against the trend. Was JPMorgan Chase short a ton (literally) of silver? I have no idea. Was the series of margin increases for silver contracts by the CME an inside job to help out JPMorgan? Again, I have no idea. I buy silver as long term protection against a depreciating dollar. There's no way the CME or JPMorgan Chase can cause a crashing silver market during a period of aggressive money printing.

As for the current situation, there is no question that a hike in margin requirements was necessary, given the way silver was climbing. Whether a series of hikes was necessary, I have no idea. And as a long term holder I don't care.

As for the conspiracy theorists who think the silver market is manipulated, the point I made on March 7 still holds. If you think the silver market is being manipulated by insiders like JPMorgan Chase, why would you ever try and fight them? As I said, they will change the rules in the middle of the game, which the series of margin hikes might be all about. But if you are a long-term accumulator it shouldn't matter. Use weakness, resulting for any reason, as a buying opportunity. In the long run, supply and demand factors control prices. If the world is flooded with dollars, there will be tremendous demand for silver and there isn't an insider rule that can stop silver from going up under those conditions.


  1. Thank God somebody gets it. I am so sick of hearing about silver manipulation. Day trading silver makes penny stock trading look harmless.

    I actually read the other day that some "silver guru" conspiracy theorist suggested the killing of Osama was to divert attention away from the Silver "manipulation" going on this past week.

    Silver margin hikes or not, all commodities were slammed this week.

  2. Thanks for this info.
    Now if the premiums for the American Silver Eagle can come down I will buy some.
    Premiums are about $6.00 - $7.00 a coin for the American Silver Eagle right now.
    Generics are much better at the moment.

  3. From August-April Silver ran from $19-$49.

    What a run!

    Not it sits at $35.60. Hardly a crash for those wise enough to be buying long before this run.

    I, for one, feel very foolish for loading up at $11 all those years ago.

  4. Silver's manipulation had been going on for a very long time. It's well documented in London, just google Andrew Mcguire. He was the whistleblower behind it all and they tried to kill him for it.

    As for this latest crash, did anyone notice when it happened? I watched the whole thing, and it happened in the after hours market when there were major bank holidays in Europe and Asia. There's very thin trading going on then, which is when they delivered a massive short position that drove it down. Now all the sellers are helping it go down. I remain long term incredibly bullish, though.

  5. And also, make sure when you're buying gold bullion to buy it in Eagles. Anything else is a taxable if you choose to sell it.

  6. Thanks for this excellent post. I think people need to keep in mind what they buy silver for. If you believe a dollar crash is coming, obviously you'll want to hold plenty of silver to protect yourself, and you should be thrilled to buy it below its late-April price.

    But even if you don't buy Austrian arguments about central banking and you think the dollar will be fine long-term, Harry Browne would've still said silver and gold should be part of your savings strategy, because you're likely to see nasty inflation in your lifetime and metals are the only real protection against that. In which case you should still be thrilled to buy it under $50/oz.

    If you're panicked at silver's drop this past week, you were speculating on its price, an entirely different activity from saving or protecting yourself from QE. In which case you either lost money you can afford to lose, or you're an idiot and you lost money you can't afford to lose.

  7. The question is not whether it was manipulated to go down, BUT what manipulation caused it to spike the past few months. It obviously was not sustainable, and the unwinding has not been done yet. Silver should be at most in the mid 20s right now. It was a bubble and it is now deflating. Eventually, if the goobermint fails to come to grips with the debt/deficits then it will legitimately go back up; but at this time there is no reason for the vertical rise.

  8. Either way, conspiracy or not, it looks like silver is very bullish. And it's easier to afford than gold. But still probably good to own both.