Daily Market Update

U.S. 5 Year Silver Market Investigation Ends – No LIBOR Style Manipulation

Today’s AM fix was USD 1,332.50, EUR 987.92 and GBP 830.22 per ounce.
Yesterday’s AM fix was USD 1,320.25, EUR 977.67 and GBP 825.36 per ounce

Gold rose $10.60 or 0.8% yesterday, closing at $1,333.10/oz. Silver gained $0.11 or 0.51%, closing at $21.76. Platinum rose $4.19 or 0.3% to $1,422.49/oz, while palladium climbed $3.22 or 0.4% to $720.22/oz. 

Gold and silver have consolidated on yesterday’s gains and silver is up nearly 1% to $22/oz. Both rose yesterday for the first time in four sessions on fears that U.S. budget negotiations have stalled, increasing the risk of a U.S. government shutdown.

While a shutdown is unlikely, the politicians are likely to again raise the U.S. debt ceiling to close to  $18 trillion, storing up much greater problems for the U.S. and global economy in the long term.

Silver in USD with Resistance and Support – 5 Year  (Bloomberg)

Silver’s support is at $20/oz and a fall below that level could see silver test the next level of support  at $18.40/oz mark. Resistance is at $25/oz and a breach above resistance should see silver quickly test the next level of resistance at $35/oz (see chart above).

Expectedly, the Commodity Futures Trading Commission (CFTC) has closed the investigation that was publicly confirmed five years ago, in September 2008, concerning silver manipulation by Wall Street banks. 

The Division of Enforcement is not recommending charges to the CFTC in the silver investigation. Despite the five year investigation, no report of the investigation or its findings is being released to the public.

The CFTC statement said that “based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets”.

In September 2008, the CFTC confirmed that it was investigating complaints of misconduct in the silver market. At that time the Commission had received complaints regarding silver prices. These complaints were focused on whether the silver futures contracts traded on the COMEX were being manipulated.

By reference to publicly available information concerning large traders with short open positions in the silver futures contracts, the complaints alleged that the concentrated large shorts in the silver market were responsible for manipulating silver futures prices. 

The decision may highlight the great difficulty that U.S. regulators face in proving a case of market manipulation, even after the CFTC was given greater powers to crack down on trading malfeasance after the 2010 Dodd-Frank financial reforms.

Incredibly, only once in its 36 year history has it successfully concluded a manipulation prosecution. This was a 1998 case concerning electricity futures prices. Occasionally, the CFTC has levied heavy fines for trading rule violations.

The closing of the probe was a rare bright spot for Wall Street commodities players and banks during a year in which the U.S. power market regulator has leveled record fines against two big banks, and the Federal Reserve is considering whether to rein in Wall Street’s ability to operate in physical metal and wider commodity markets.

Gold in USD with Resistance and Support – 1 Year  (Bloomberg)

Democrat commissioner Bart Chilton, who had championed the silver inquiry, said he was disappointed.

"For me, there’s not been a more frustrating nor disappointing non-policy-related matter at the CFTC," he said in a statement after the agency’s announcement.

The Gold Anti-Trust Action Committee, an advocacy group that believes the Federal Reserve and banks are colluding to keep gold and silver prices artificially low, said it was not surprised by the CFTC decision.

"We believe that the U.S. government is part of the trading operation. In essence, you are not going to have the CFTC turn against its own government," GATA Chairman Bill Murphy said.

"We are not even slightly surprised and had expected this."

A JP Morgan spokesperson declined to comment.

The CFTC findings that there has been no manipulation of the silver market came a day after the Federal Reserve itself had expressed concerns about ‘suspicious’ trading in the gold market and a day after there were further revelations and developments regarding LIBOR interest rate market manipulation and rigging. 

The world’s largest interdealer broker, ICAP, has been fined $87 million (€64.4m) by U.S. and UK regulators over its role in the Libor rate rigging scandal. The CFTC and UK Financial Conduct Authority (FCA) ordered ICAP to pay $65m and £14m respectively to settle allegations of wrongdoing.

The scandal, which has laid bare market manipulation and the failings of regulators and bank bosses, has already seen three banks fined $2.6 billion, four individuals charged, scores of institutions and traders grilled and a spate of lawsuits launched.

Banks and brokers have faced allegations that their employees actively colluded with traders seeking to fix rates for personal gain – and were handsomely rewarded.

Silver Prices/ Fixes / Rates / Volumes – (Bloomberg)

Silver’s fundamentals remain very sound, with a very small finite supply of above ground, investment grade silver coins and bars and robust and increasing industrial and store of value demand – particularly in Asia.

We continue to believe silver will rise to its real record high or inflation adjusted high of $140/oz in the coming years.

It remains an important diversification for all looking to protect their wealth from “bail-ins” or deposit confiscation and currency devaluations.

Gold Holds Gains On Concerns Over U.S. Debt Ceiling – Reuters

U.S. CFTC ends probe of silver markets, takes no action – Reuters

Debt Ceiling To Be Hit October 17 Barring Action: Lew – Market Watch

Gold, Silver Advance as U.S. Budget Concerns Escalate – Bloomberg

Prepare For Collapse Of Fed Ponzi Scheme – Huffington Post

Love and Fear Trade To Lead To Higher Gold – Mineweb

CFTC Concludes Long-Running Silver Manipulation Investigation, Finds Nothing Wrong – Zero Hedge

Another Reason to Worry About China – Dollar Collapse

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Mark O'Byrne
Executive Director


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