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Silver's Smoking Guns, Part 3: Market Paradox

Stocks in this article: JPM CME

Silver priced below $4/oz was one of the most one-way bets in the history of commodities. Any objective analysis of that market would have indicated silver clients required much less hedging than in any other commodity market, not more. This negates the lies of the bullion banks.

Instead, building and maintaining a short position at least an order of magnitude larger than what could possibly be justified by market conditions yields only one, possible conclusion: This blatantly manipulative short position was/is a millstone aimed at dragging down the silver market and the price of silver.

We can support this obvious conclusion with irrefutable empirical evidence: the collapse of silver inventories. As I explained in theoretical terms in a prior commentary , excessive shorting must always result in the collapse of inventories. What appears to be by dollar value the most grossly excessive/disproportionate short position in the history of commodity markets resulted in a 90% collapse in silver inventories. Case closed.

But there's more. When precious metals commentators were accused of being "conspiracy nuts" for pointing toward obvious, serial manipulation of the silver market they were frequently asked, "Where is your whistle-blower?"

In rebuttal, GATA (the Gold Anti-Trust Action Committee) produced veteran metals trader Andrew Maguire who was ready, willing, and able to explain in detail how and when the silver market was being manipulated.

GATA produced Maguire just as the CFTC was about to hold its farcical "hearing" about allegations of precious metals manipulation. The CFTC's response was to refuse to allow Maguire to testify, crossing the line between acute tunnel-vision and willful blindness.

Then we have the "attack" on the silver market by the administrator of the Comex itself, the CME Group (CME). In the Spring of 2011 the CME Group bombarded the silver market with five, large rapid-fire increases in margin collateral requirements, the last four increases coming after the price of silver was already plummeting lower.

Here readers need to understand that margin collateral requirements are flat rates, not percentages. Thus the plummeting price of silver itself was already rapidly increasing the effective size of margin requirements (in percentage terms). Indeed, the (only) appropriate regulatory action for a commodity that is rapidly falling in price is to reduce margin requirements. There can be no possible defense of that succession of margin increases.

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