Manipulating Precious Metals Markets

Includes: GLD, JPM, SLV
by: John Lounsbury

There has been a lot of news in recent weeks about precious metals trading, but a lot of it is not on the front pages. In fact, you have to dig to find some details. One recent nugget involves a London silver trader, Andrew Maguire. You can read Andrew Maguire's e-mails to the CFTC (Commodity Futures Trading Commission) alleging silver market (and gold market) manipulation by JP Morgan Chase (NYSE:JPM), available here, courtesy of King World News.

Maguire spells out in advance of the events exactly what moves will occur in six moderately lengthy detailed e-mails from January 26 through February 9, 2010.

Responses from the CFTC: Two e-mails containing a total of two terse sentences each.

KNW also has an audio of an interview with Maguire, as well as with Adrian Douglas, board member of GATA (Gold Anti-Trust Action Committee, In the interview, it is stated that Maguire was refused the opportunity to testify before a hearing of the CFTC.

A meeting of the CFTC was held on March 25 in Manchester, CT to address metals market manipulation. William Murphy, Chairman of GATA, testified. Murphy said:

The Gold Anti-Trust Action Committee [GATA] was formed in January 1999 to expose and oppose the manipulation and suppression of the price of gold. What we have learned over the past 11 years is of great importance in regard to this hearing on position limits in the precious metals futures markets. Our efforts to expose manipulation in the gold market parallel those of Harry Markopolos to expose the Madoff Ponzi scheme to the Securities and Exchange Commission.

Initially we thought that the manipulation of the gold market was undertaken as a coordinated profit scheme by certain bullion banks, like JPMorgan, Chase Bank, and Goldman Sachs, and that it violated federal and state anti-trust laws. But we soon discerned that the bullion banks were working closely with the U.S. Treasury Department and Federal Reserve in a gold cartel, part of a broad scheme of manipulation of the currency, precious metals, and bond markets.

Murphy went on to say that GATA has filed suit for Fed and Treasury failures to make disclosures about gold trading under the Freedom of Information Act.

Murphy also testified that massive naked shorts exist in the gold market, far in excess of the physical metal available for trading. He refers to these short positions as "paper gold". He infers that these massive short positions are maintaining gold at artificially low levels in an attempt to support the value of fiat currencies. He states that two banks, JPM and HSBC, held more than 95 percent of the gold and precious metals derivatives of all U.S. banks in early 2009. The holdings of the Fed and the Treasury are still secret.

In the shadowy world of precious metals trading, an individual is like Truman, the Jim Carey character in the movie The Truman Story. Only now is the illusion of his life becoming apparent. And it seems that there is much more still to come to light.

Disclosure: No current positions.