By Melissa Pistilli—Exclusive to Silver Investing News

In a recent Resource Investing News Network survey, we asked the question, “Do you believe the silver market is rigged?” to which an eye-popping 66 percent responded, “Yes!”

We shared our results with some of the precious metals markets' most notable names and a few were kind enough to comment on what many consider a highly contentious subject.

“The Silver Institute, like the majority of your readership, believes in an open and transparent silver market,” said Michael DiRienzo, Executive Director and Secretary of The Silver Institute. “The CFTC handed this investigation to its own Enforcement Division three years ago after issuing letters in 2004 and 2008. We eagerly await their findings and will comment when they are released,” he added.

Jeffrey Christian, Managing Director and founder of CPM Group — who has at times been accused of being a government plant by some ardent supporters of the silver manipulation theory — is not shy when it comes to voicing his position on the topic. He told Silver Investing News that “over 90 percent of those invested in physical silver are not into conspiracy theories; they are not the 'guns and bunker' crowd,” to which “silver is not just an investment, it's a religion.”

While Christian may think those 66 percent are representative of the “fringe,” long-time silver manipulation crier Ted Butler, founder of Butler Research, said he's “trying to figure out what the heck the other 34 percent are looking at that they don't see it.”

For a few decades now, gold and silver analysts and investors have debated the validity of allegations concerning precious metals price manipulation through COMEX futures contracts by a cartel that supposedly includes large bullion banks as well as the US Treasury and Federal Reserve. By maintaining an overly large short position in the silver futures market, so the theory goes, these banks have been at times able to suppress the price of the white metal in the face of bullish fundamentals.

However, the US Commodities Futures Trading Commission (CFTC) at the urgent request of independent investors has looked into the allegations of price manipulation in the silver market, first in 2004 and then again in 2008, and each time has reported finding no significant proof. In 2010, the most recent investigation began when independent bullion trader Andrew Maguire went public with allegations of manipulation of the gold and silver markets by JPMorgan Chase and HSBC, which prompted a class action lawsuit against the two banks. In September of this year, HSBC was dropped from the lawsuit with reports that the plaintiffs and the bank had entered into a tolling agreement, which is often used to allow sides to negotiate a settlement while also leaving plaintiffs the ability to file a new complaint if negotiations prove ineffectual.

Although the current investigation by the CFTC is considered ongoing and Commissioner Bart Chilton has said he believes violations have take place, the CFTC has yet to finalize its investigation.

And so, the battle rages on between those who ardently believe that large banks like JPMorgan are actively suppressing the price of silver and those who think the likes of  Gold Anti-Trust Action ( GATA) and Butler are merely in the business of selling conspiracy theories and not interested in the truth.

Are Precious Metals Prices Rigged?

This year's Silver Summit, hosted in Spokane, Washington October 20-21, featured a debate on the question “Are Precious Metals Prices Rigged?” Moderated by BNN's Andrew Bell, the debate featured GATA committee chairman Bill Murphy and CPM Group's Jeffrey Christian.

While an event like this is always much anticipated among silver bugs and manipulation theory skeptics alike, the actual debate itself wasn't earth-shattering. The positions of both speakers on the questions asked shouldn't come as a surprise to anyone familiar with the two-decade long debate.

Murphy extolled the mountains of evidence “of the gold and silver price suppression scheme which has become blatant almost beyond comprehension” that GATA has garnered from the public domain including historical documents and the Fed's own minutes over the past 13 years; Christian, of course, said all of GATA's allegations can be refuted and have been, directing the audience to CPM's website.

“In all of this time GATA actually has not come up with a credible shred of evidence,” stated Christian who said he believes Andrew Maguire is merely an “attention seeker” because he has been unable to prove to Christian's satisfaction that he ever worked in the bullion market. He also had some harsh words for GATA, which he considers “a gigantic distraction,” claiming their “allegations are full of internal inconsistencies which simply don't hold up to statistical scrutiny or simple logic.”

When asked by Bell, “If this conspiracy is so widespread why is the gold mining industry not screaming blue murder over it?” Murphy said miners are hesitant to go up against the government, which must approve their mining permits, and the bullion banks, to which they turn to for financing. However, Christian rebutted that bullion banks are not the only financial entities providing non-bank financing. He believes the mining firms are headed by “sophisticated, educated executives who can look at the evidence and say there is nothing here to support these allegations. I have to focus on running a business and running it profitably and running it efficiently and this is, again, a giant distraction.”

JPMorgan and HSBC

In response to an audience member's direct question about his position on the allegations against JPMorgan and HSBC, Christian said he doesn't believe that these banks hold an undue concentrated position in the COMEX silver futures market. Their positions in the market are rather primarily hedge positions of physical or OTC market transactions, forward purchases and metal that is leased out, he explained. Christian pointed out that JPMorgan posted record profits on its gold and silver books this year, which he said wouldn't have a happened if the bank had a massive short position in the face of rising prices.

Another question concerned CME's decision to raise margin requirements when prices are rising. Murphy said a better question would be “why haven't they lowered the margin requirements” now that volatility in silver has fallen?

Christian defended CME's raising margin requirements, “There has never been a default of a major exchange or clearinghouse in the US because the exchanges require people to prove they have the financial wherewithal to cover their positions.” He said higher margin requirements are not a “negative” for those holding long positions, but are rather harder on those holding naked short positions, which are not backed by physical collateral. Naked shorts must increase their margin balance to prevent defaults.

Silver price outlook

Bell asked both Murphy and Christian for their silver price outlook. GATA's Murphy gave a bullish forecast of $60 an ounce for the white metal in 2012, stating “you're going to hear more about shortages and more about JPMorgan's role in short positions is going to come out.” Christian put forward a more conservative forecast with silver ranging between $26 and $42 an ounce over the next three months as extreme volatility continues to shake the markets. For 2012, he sees silver quarterly averages at around $30 to $33 an ounce with a range of $26 to $38 an ounce for the year.

In the eyes of this reporter, CPM Group's Jeffrey Christian was the clear winner in this debate in terms of his ability to defend his position with logical explanations; while Mr. Murphy relied more on pathos, arousing the emotions of his supporters. But when it comes to the truth of the matter, what's clear is that the debate over who's right and who's completely full of it will continue well past the CFTC's much anticipated decision.

You can watch the debate  here and form your own opinion. Please feel free to share your comments on the debate in the comment section below.

Silver Price Manipulation: Fact or Fantasy? from Silver Investing News