Wednesday, August 29, 2012

The Top 3 Rules to Understand About Gold & Silver Price Behavior


Over the past 10+ years of this gold and silver bull, I’ve seen gold and silver “newbies” repeatedly make the same mistakes. So I’ve decided to write this short article to help people more clearly understand gold and silver price behavior. There are 3 solid rules to follow and understand when buying gold and silver bullion and or mining stocks. Because of the lack of understanding of these rules, many investors unfortunately unload gold and silver assets at the exact wrong time, at the bottom of long corrections and right at the beginning of huge new legs higher. Back in mid-May, when I wrote that it was a very low-risk, high-reward point to buy gold and silver assets, virtually no one outside of the very small circle of seasoned gold and silver investors were interested. Now that gold and silver have risen considerably since that point and time, there is more interest than just a few weeks ago, but again, some newbies will make the mistake of buying into gold and silver now, and on any slight pull back, listen to the doubts disseminated by the mainstream media, and panic sell again.

I previously stated on August 16, 2012, the following: “The one thing I can guarantee, however, is that when gold and silver finally make new highs, and they will, some of the ferocious moves higher are absolutely going to stun a lot of people.” And I still stand by this statement. In retrospect, I don’t consider the recent moves in gold and silver to be part of the “ferocious moves higher”. That hasn’t happened yet and we’re still a bit away from the manifestation of the scenario that will trigger these moves. Still, some of the moves higher in gold and silver that will happen over the next 1-2 years will be so rapid and shocking that to most people, they will seem impossible given the psychological damage done by the past 18-month gold & silver correction and consolidation period. And to those that pay too much attention to the mainstream financial press and not enough to the realities of the physical, not paper, gold and silver markets, these violent moves higher will be likewise shocking.

Because gold and silver have been so suppressed for an extended period of time the consequent defensive actions of exiting PM mining stocks and re-purchasing them at solid re-entry points has left many gold and silver investors weary and with a negative outlook ahead. Though patience is a virtue when holding and stacking gold and silver assets, this virtue is much more easily vowed than practiced, especially during volatile periods of price behavior upward and downward during an extended consolidation phase. 

However, those that are able to see through the volatility games of banksters will see something entirely different – a solid base for gold and silver’s next move higher to escape the banking cartel’s price suppression schemes. Thus, even though it is likely for gold and silver assets to take a breather this week and for a pull back in prices to happen before the upward trek continues, whether gold and silver are rising or falling, every gold and silver investor needs to understand the top 3 rules when holding gold and silver assets. So here they are:

(1) Volatility Does Not Equal Risk.
Far from it. In fact most volatility in gold and silver is deliberately manufactured by the banking cartel, and is manufactured in fake paper derivative markets in which prices are set with absolutely zero regard for the actual physical supply and physical demand determinants of these two precious metals. Furthermore, since banker cartel manipulation of paper gold and silver derivatives plays such a big role in price volatility, moves in gold and silver are often just as violent to the upside as they are to the downside after long periods of consolidation, as violent moves higher are often caused by short-covering of panicked hedge funds and banking cartel members that are forced to unwind shorts when the momentum to the upside becomes too great for them to suppress. 

Furthermore, after brief periods of very quick rises, another short-term correction triggered by day traders taking profits and/or desperate banking cartel members actions in paper markets does not mean the uptrend has reversed back downward again…which bring us to Rule #2.

(2) Lack of Patience is the Greatest Enemy to Buyers of Gold, Silver and PM Mining Shares.

With physical gold and physical silver, bankers deliberately create massive volatility in paper prices at times to discourage the uninitiated from buying physical and to try to goad those already in to mistakenly sell. With PM mining shares, the greatest mistake investors make with this asset class is to let the bankster created artificial volatility in mining shares discourage them into selling out of all of their shares right before the next great leg higher. While it is true that the vast majority of gold and silver mining shares in the junior resource sector are junk and inflated pipe dreams, even cashed-up, solid junior mining companies will be taken down in price during bankster raids on paper gold and paper silver and thus, patience with junior mining companies is essential to coming out on top.

One of the top performing gold stocks lost more than 50% of its value a few years before the onset of the Great Depression before going on a spectacular +1,258% run higher that ended in1939. Those that were impatient because they were unable to see the big picture of the importance of gold during periods of severe economic instability sold out when this stock corrected sharply, locked in losses, and received none of the spectacular gains. Many today will repeat this same exact mistake.

(3) Ignore the White Noise and Disinformation Anti-Gold/Anti-Silver Campaigns of the Commercial Banking Industry.

Clients that allocate money to physical gold and physical silver purchases or PM mining share purchases translates into lost revenues for fee-based managed money commercial banking and brokerage firms because this normally translates into money that leaves these firms and never comes back. Thus, the vast majority of commercial banking/brokerage firm employees have great incentive to prevent their clients from purchasing any gold and silver assets of any nature, including even robust PM mining stocks.

Thus, when the most robust PM mining shares are at super undervalued valuations and represent a low-risk, high-reward set-up, commercial banking/brokerage firm employees are likely to tell you there is ZERO opportunity in PM mining shares. However, when great runs higher in gold and silver assets occur, uninformed commercial banking employees are likely to inform you of this situation and goad you into purchases right before the next steep correction, as was the case when silver hit $50 an ounce last year. A sharp, rapid and significant correction in the first month of buying gold and silver is a lesson likely to keep many “newbies” from ever returning to the gold and silver markets in the future.

Stay Long in Gold, Silver: Karvy Commodities


 Gold: Gold futures prices are continuing last week’s momentum at the early Globex by gaining $5 from previous closing. The Asian equities are trading mostly at a weaker note after Chinese industrial profit fell by the most this year. But again the Chinese Premier Wen Jiabao hinted for further accommodation as the economy’s weakness is deepening.

Thus, hopes of easing from the global central banks are likely to keep gold buoyed for the day. Gold investment holdings rose 0.92% to 1286.50 tons last week, highest since March this year, would have also supported the metal to grow. From the economic data front, the German IFO numbers are likely to be weak while the US Dallas Fed manufacturing is expected to revive a bit but may still remain on a negative territory.

This is although likely to keep the Euro under strain, market may closely watch the week end’s Jackson Hole Symposium, which may provide a clue on how the global central banks see economy and what are the further accommodations it can provide. The Fed and ECB President’s speech may guide market movements and the event may turn out to be the most important of the week as both President Bernanke and Draghi are going to meet. Said above, we could expect gold to stay strong for the day and hence we recommend staying long for the metal from lower level.

Silver: Today morning silver future is seen on a continued momentum by gaining near 0.35% at the Globex despite the Chinese industrial profits fell the most in this year. However, prices would have been supported as the Chinese Premier Wen Jiabao hinted for further accommodation as the economy’s weakness is deepening.

Thus, hopes of easing from the global central banks are likely to keep silver buoyed for the day. Although the Asian equities dropped after the Chinese data released, the news of accommodation may help prices to remain strong. Reports from the US Dallas Fed may show a slight improvement in manufacturing in evening which may support silver. Nevertheless, weak IFO numbers from Germany may put slight pressure on the metal.

Besides, this week is likely to be dominated by anticipation of Jackson Hole Symposium, which may provide a clue on how the global central banks see economy and what are the further accommodations it can provide. Therefore, prices are likely to remain buoyed. Said so, we recommend staying long for the metal from lower levels.

Thursday, August 23, 2012

Bill Murphy- JP Morgan Is FINISHED! Silver Scam to Rival Libor

Bill Murphy discusses how JP Morgan is in trouble and how gold and silver are likely to go up as he predicted Do you agree with Bill Murphy that JP Morgan Is finished?

Friday, August 10, 2012

The Commodities Futures Trading Commission (CFTC) Silver Investigation



There has been an explosion of interest and commentary these past few days as a result of a front page story in Monday’s edition of the influential Financial Times (of London). The story stated that the CFTC was set to drop its four year investigation into alleged silver price manipulation due to insufficient evidence to bring charges, according to three unnamed sources. 

I went to sleep Sunday evening when the story first appeared prepared to wake up to similar and confirming stories in other publications. Instead, there were no other stories confirming the case was set to be dropped; only strong statements that the FT was story was “premature” and “inaccurate in many respects” by a named source, Commissioner Bart Chilton of the agency.
 
The CFTC’s silver investigation is a hot button issue and the FT story, as well as Commissioner Chilton’s response to it, set off an outpouring of emotion and conjecture in the precious metals world. And for good reason, as this is an extremely important issue. There can be no greater concern than whether a market is manipulated in price. 

The issue of a silver manipulation is also a divisive matter, even within the CFTC itself; otherwise there likely wouldn’t have been leaks that the investigation was over and the immediate response of not so fast. As is usually the case with extremely divisive issues (like politics and elections), emotions take hold and the real issues can get distorted. 

Let me try to frame the picture in an unemotional manner. Admittedly, that’s no easy task since I was the prime initiator behind this silver investigation and the two prior CFTC silver investigations in 2004 and 2008. (Too bad there’s no Olympic event for initiating government investigations).

However, the truth is that four years ago I was not trying to get the Commission to investigate, as they had just completed a few months earlier, in May 2008, their second silver investigation in four years. By then, I knew where the Commission stood on whether silver was manipulated and it was pointless to ask them to investigate again. I had a different motive in mind when I urged readers to write to the CFTC about the now-infamous Bank Participation Report of August 2008.

That was the report that showed that one or two US banks held an obscenely large and concentrated short position in COMEX silver futures that amounted to 20% of world production and 30% of the entire COMEX silver market. No major market had ever been that concentrated. I knew that this short position was so concentrated that, in and of itself, it proved silver was manipulated because the price would be radically higher in its absence. That is always the litmus test for manipulation, namely, what would the price most likely be if a concentrated position did not exist? 

As a result of the August 2008 Bank Participation Report and subsequent CFTC correspondence to US lawmakers, I also learned at that time that JPMorgan was the big silver short, as I speculated on in this article. http://www.investmentrarities.com/ted_butler_comentary/09-02-08.html This is when and where the precious metals world came to learn that the big silver short was JPMorgan.

I asked readers to write to the CFTC not to investigate silver anew, but for the agency to simply explain how a big bank holding such a large percentage of the market would not be manipulation. This is a question that the Commission should have answered immediately since it was so basic to commodity law. The last thing I intended was for the agency to embark on a multi-year phony investigation as a delaying tactic for not being able to answer a basic regulatory question. 

Because the Commission could not explain the legitimacy of JPMorgan’s concentrated short position, they continued to drag out resolution by pretending to investigate. But four years is an extraordinarily long time for any government investigation, phony or otherwise, and it appears that the CFTC has to confront the issue soon; hence the FT article.

While the FT article was disappointing (at least it mentioned my name in a non-derogatory manner) and Chilton’s response was encouraging, the reality is that it is unlikely that the investigation will be resolved much differently than the version leaked to the paper. For one thing, nobody likes admitting they had royally screwed up and if the Commission were to bring manipulation charges now in silver, it would be admitting that it missed the wrongdoing for the previous two decades, despite continuous and documented warnings from 1986. How likely is that?

More importantly, were the agency to charge JPMorgan with manipulation of the silver price (as it should) that could set off a series of events that could easily grow out of control. One thing that makes the silver manipulation so potentially profound is that the core allegation is of a crime in progress. The CFTC has never busted up a manipulation that was in force; like most government agencies, it only reacts after the fact. Don’t take that solely as a complaint, but more as an observation that governments are more reactive than proactive. 

Because the silver manipulation is very much in force, were it to be terminated by CFTC actions against JPMorgan and/or others, it would be a “live” event for the first time. History shows that all manipulations end violently. In the case of silver, since it has been depressed in price by a downward manipulation, its termination would necessarily cause prices to explode higher. Any charge brought by the CFTC would send a clear signal to the world that silver had been depressed in price and was undervalued and, therefore, should be purchased. This would cause a flood of buying and discourage new selling, causing the price to truly explode, most likely in disorderly market conditions. Do you find it likely that the CFTC would wish to cause that disorderly pricing that could lead to further unsettled conditions in other markets?

If JPMorgan (and perhaps the CME Group) were found to be the main culprits in the silver manipulation and the CFTC brought charges against them, the repercussions to JPM and the CME could be a threat to them as going concerns. It was never a case that JPMorgan couldn’t financially afford to buy back its concentrated silver short position; it was always a case that should JPM ever move to buy back aggressively to the upside that would prove conclusively that it had been manipulating the price of silver all along. 

That would set JPMorgan (and the CME) up for a legal holocaust, both civil and criminal. There has been talk of a civil litigation nightmare for those banks deemed guilty in the developing Libor manipulation; but determining damages will be difficult because the Libor rates were allegedly manipulated both up and down, making the damages unclear and hard to prove. Were there to be findings of a downward manipulation in silver, those damaged, from investors to producing companies and countries could easily demonstrate the damage. Back in the Hunt Bros silver manipulation of 1980, one of the successful litigants was Minpeco, the government producer organization from Peru, who I remember collected more than $100 million. That would be chicken feed compared to the consequences of the much longer downward silver manipulation of today by JPMorgan. And this says nothing of potential criminal liability. 

JPMorgan is perhaps the most important and influential US bank and for the CFTC to move against them in a matter as important as basic market manipulation could lead to unintended consequences that could threaten the world’s financial system. Do you think the CFTC would dare challenge the supremacy of JPMorgan considering that potential financial fall-out? Besides, as I have written previously, JPMorgan is too big to sue, at least matched up against the CFTC. The matter of the bank manipulating any market is something that JPMorgan would defend against to the death, as for it to be found guilty could possibly end the bank in its current form.

JPMorgan would certainly spend $5 billion (only one quarter’s net profits) to fight any charges in connection with a silver manipulation and, at a minimum, delay a legal resolution for decades. On the other hand, the CFTC is struggling to fund the whole agency on $200 to $300 million annually. This is most likely the reason behind the leak to the FT about the silver investigation being dropped, namely, the CFTC is no match for JPMorgan and the agency knows it. This has nothing to do with law, or justice, or doing what is right; it is simply a case that the crooks at JPMorgan (and the CME) can bully anyone they chose, including the US Government. The most plausible alternative explanation, of course, is that the Treasury Dept ordered the CFTC to keep its hands off JPMorgan. Either way, it stinks.

The truth is that the silver investigation was a ruse from the start in that the CFTC could never have moved against JPMorgan or the CME in any circumstance. The proof of that is evident in the many other specific instances of price manipulation in silver that have occurred after the soon to be dropped investigation began. The most obvious instances were the two separate 30% and 35% price smashes in a matter of days that occurred in silver in 2011. There never were such blatant price declines in such a short time in any world commodity in history, to say nothing about there being no obvious supply/demand changes to account for the declines. 

In other words, the CFTC started their third silver investigation four years ago as a way of avoiding having to explain how JPMorgan could be allowed to hold a clearly manipulative concentrated short position and then ignored the two greatest manipulative price events in commodity market history while the phony silver investigation was under way. Think of how devious and dishonest the CFTC has been; it announces a formal silver investigation to avoid having to answer bedrock regulatory questions, then ignores the two most manipulative prices events in history claiming it can’t comment on them because there is an active investigation under way. If government officials could ever be horse-whipped for malfeasance and for failing to protect the public interest, surely the CFTC’s performance in silver would permit it. 

I realize that what I have written to this point paints a picture that is not optimistic for the resolution of the silver investigation that most would favor. I am sorry about that, but I try to be an analyst and not an entertainer. That said I’d like to spend some time explaining why the outcome of a dropped case may not matter much and that the net result is good for silver. 

More than anything, this FT leak was likely a trial balloon for the CFTC to gauge public reaction to it dropping the case. If so, the reaction couldn’t be clearer; even I was taken aback by the near universal condemnation of the agency for proposing to drop the case. I think what got to people the most was the suggestion that the agency would walk away without bothering to explain the concentration and the two historic price drops of 2011, to say nothing of the almost daily beatings in silver as a result of crooked High Frequency Trading. If anything, the FT article may have given legs to the silver manipulation allegations.

While it was a mainstream media publication that leaked the story, the silver manipulation is surely not a mainstream media issue. The silver story is an Internet and private publication issue that grew despite being ignored in the mainstream media. As such, any declaration that the matter is now closed will not close it anywhere outside the MSM, where it was never accepted to begin with. It’s not just that the silver manipulation was never accepted by the MSM, it was more a case of it never being allowed to be openly discussed. But legitimate questions of undue market concentration and historic and unjustified silver price movements are matters worthy of transparent examination that MSM censorship has been unable to stifle. 

Not only is the matter not going away, the leak to drop the case may bring greater attention to it. Such attention could prove to be the death knell for the silver manipulation, as the last thing the silver manipulators want or need is a fully transparent examination of the facts. One of my longest held beliefs has been that as time rolls on more would become aware of the real silver story and once they did, more investment demand in silver would result. That has occurred and any new attention brought to silver as a result of a dropped investigation will likely accelerate the process. The truly amazing thing is in how slowly the real silver story has spread in the ranks of super big investors. Aside from Eric Sprott, very large investors have overlooked the silver story completely. I am as certain as I can be that these very large investors just haven’t taken the time to look objectively at silver. I think it’s a case of silver being such a universally known item that most people assume they already know all the facts because they know what silver is. 

This includes very large investors who, in addition, may actually be turned off that so many smaller investors have invested in silver. It’s a common human failing to dismiss something because others thought to be less knowledgeable got there first. In the long run, however, very large investors are more concerned with superior returns, so the key is getting them to look at silver objectively. The dropping of the silver manipulation may be that key.

Perhaps the most amazing thing of all, at least to me, is the glaring fact that even after four years of non-stop public allegations about involvement in the silver manipulation, JPMorgan still remains the big short. It is hard for me to comprehend how such a large and powerful financial organization (as well as the CME) could silently tolerate the obvious reputational damage which is accruing. While JPMorgan’s short COMEX silver position is in the lower range of what it has been since the Bear Stearns takeover of March 2008, it remains shockingly large and concentrated. After last week’s big increase of 3000 contracts, JPM’s short position, at 18,000 contracts (90 million oz), is still more than three and a half times the proposed position limit in silver.

The most plausible explanation for why JPMorgan has not rid itself completely of this manipulative short position is because it can’t do so easily. This is particularly true if JPMorgan tried to buy back its silver short position on rising prices. It would be a shock to the silver market system if the biggest short seller of last resort suddenly turned buyer. In essence, this is the root problem with concentrated positions in general – they cannot be unwound without market upheaval. 

For JPMorgan to turn to the silver buy side would beg the question – who would sell to them and at what price? The problem with the sharply higher silver prices that JPMorgan would cause if it turned silver buyer is that it would confirm that the bank was, in fact, manipulating the price of silver all along. To my mind, this means JPMorgan is trapped. They can’t run and they can’t hide. This is precisely the conclusion that any large investor would reach if that investor took the time to study silver closely. I can’t see how that won’t happen in time and a more bullish set up is hard to imagine.

Of course, I would be the happiest guy in the world to be proven wrong about what the CFTC will do with the ongoing silver investigation. But the potential of the likely greater exposure of the real issues in silver that a dropped investigation would bring is plenty good. With silver, it’s always been about getting people to learn the real facts.

Ted Butler

Sunday, August 5, 2012

Four-Year Silver Probe Set To Be Dropped


A four-year investigation into the possible manipulation of the the silver market looks increasingly likely to be dropped after US regulators failed to find enough evidence to support a legal case, according to three people familiar with the situation.

The Commodity Futures Trading Commission first announced that it was investigating “complaints of misconduct in the silver market” in September 2008, following a barrage of allegations of manipulation from a group of precious metals investors.
In 2010, Bart Chilton, a CFTC commissioner, said that he believed there had been “fraudulent efforts” to “deviously control” the silver price.

But after taking advice from two external consultancies, the first of which found irregularities on certain trading dates that it believed deserved more analysis, CFTC staff do not have sufficient evidence to bring a case, according to the people familiar with the situation.

The agency’s five commissioners have not yet formally determined the outcome of the investigation, leaving the possibility that staff could be instructed to dig deeper. A CFTC spokesman said: “The investigation has not reached its conclusion”. He declined further comment.

Ending the probe would infuriate some US silver investors, who claim that a group of large investment banks – in particular, JPMorgan – has conspired to drive the price of silver lower.
“I’m sure it will be met with some concern from a certain group of aggressive silver speculators,” said one person familiar with the investigation.

In a recent blog post, Ted Butler, a newsletter publisher and unofficial champion for the silver investors, accused the CFTC of being “negligent in failing to terminate the obvious manipulation ongoing in silver”.

The CFTC has analysed over 100,000 documents and interviewed dozens of witnesses since it began investigating the market in 2008, it said last year. The people familiar with the situation said the evidence included records from JPMorgan.

The conclusion of the investigation will come as a relief to JPMorgan. Although no company or individual was named in the CFTC investigation, the Wall Street bank has suffered a torrent of allegations from silver investors on the blogosphere.

One campaign exhorted sympathetic readers to “crash JPMorgan” by buying silver – based on the assumption, which JPMorgan has repeatedly denied, that the US bank has a large bet on lower silver prices.

In addition, a class-action lawsuit has been filed against JPMorgan. Lawyers for the bank have asked a judge to dismiss it, arguing that plaintiffs “fail to identify a single trade” showing manipulation.
Blythe Masters, head of commodities at JPMorgan, in an April interview with CNBC conceded that there had been “a tremendous amount of speculation, particularly in the blogosphere, about this topic”, but maintained that the bank had no large bets on silver prices.

“We have no stake in whether prices rise or decline,” she said. JPMorgan declined to comment on the CFTC investigation.

Previous CFTC silver inquiries in 2004 and 2008 found no evidence of wrongdoing.