TED BUTLER COMMENTARY - 2/8/09
FistFullOfDollars
Posts: 359 ✭✭✭
February 8, 2009
Vindication
(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)
New data from the CFTC, provides the clearest proof to date of a manipulation in gold, thus vindicating the long-held position of GATA (the Gold Anti-Trust Action Committee). It is my hope and expectation that GATA, run by Bill Murphy and Chris Powell (Ed Steer, a director, is a close friend), will take the evidence and do everything in their power to ram it down the manipulators’ throats and end the gold and silver manipulation.
I would like to offer further evidence of manipulation with the intent of convincing the staff of the Enforcement Division of the CFTC of the continuing crime in progress. In somewhat of a twist, I would call on all gold proponents and investors to study this evidence, as it pertains mainly to gold futures trading on the COMEX. The evidence is found in source data published by the CFTC, in the form of their weekly Commitment of Traders (COT) and monthly Bank Participation (BP) Reports.
The Bank Participation Report for positions as of February 3, indicates that three or fewer U.S. banks hold a record short position in COMEX gold futures of 111,190 contracts (over 11 million oz). an increase of 28,690 contracts from the January report. The previous record short position by U.S. banks was 86,398 contracts in the August Bank Participation Report.
http://www.cftc.gov/marketreports/bankparticipation/index.htm
In other words, the current short position held by two or three U.S. banks is almost 30% greater than the previous record. After the previous record August short position was reported, gold prices fell almost $200 over the next two months. Will that happen again? I don’t know. What I do know is that if gold prices do suffer a sharp decline, it will only be because this manipulation by two or three U.S. banks was successful.
Allow me to put the concentrated short positions in gold and silver into perspective. As the February BP report indicates, one or two U.S. banks held a 29% share of the COMEX silver market and two or three U.S banks held a 32.1% share of COMEX gold futures. Of the 73 markets covered in the report, no other market has a U.S. bank percentage even close to silver and gold, save the smallest market listed, 90-day EuroYen Tibor (Although I have over 35 years of futures experience, I don’t know, nor do I wish to know, what that is).
Please keep in mind that the Hunt Brothers and all their reported associates had a futures market position (COMEX and CBOT combined) that was under a 10% share of the total silver futures contracts outstanding at that time and were charged with manipulation. What aren’t short positions three times as large also manipulative?
As large as the current gold and silver percentages of the market held by one, two or three U.S. banks may be, those percentages are grossly understated because spread positions are included in open interest totals. Remove all spread positions (non-commercial and commercial) and the share of the market held by one or two U.S. banks in silver rises to 41.5%, and not 29%. In gold, the share of the market held by two or three US banks is really 45%, not 32.1%. How could one or two traders holding 41.5% of any market, or two or three traders holding 45% of any market not be manipulative?
When the market share of the one, or two, or three U.S. banks in silver and gold are compared to the total share of all commercial traders, the result is truly shocking. In silver, the one or two U.S. banks account for more than 81.6% of the total net short position of all commercial traders. In gold the three or fewer U.S. banks account for more than 62.3% of all commercial shorts. With such a lion’s share, these big banks completely dominate and control the gold and silver markets.
Lastly, by comparing corresponding COT and BP report data from January 6 to February 3, I can make the following statement. The entire net increase in the commercial short position in silver and gold (2,500 contracts in silver and 28,000 contracts in gold) basically came as a result of new shorting by the big U.S. banks. In other words, neither the 5 through 8 largest traders, nor the 9+ commercial traders (the raptors) changed their positions much during that period. Almost all the selling was by the big U.S. banks in both silver and gold. Ask yourself this - what would the price of gold or silver have been if these big U.S. banks hadn’t sold short in such quantities? How can that not be manipulation?
It appears obvious that the CFTC began its current silver investigation as a result of revelations in my article "The Smoking Gun" http://www.investmentrarities.com/08-22-08.html and because many hundreds of you wrote in to the Commission. Without that public participation, there would have been no investigation. But one thing always puzzled me, namely, why did that investigation appear to center on silver? What about gold? After all, in my article, I highlighted the extreme concentration on the short side of COMEX silver and gold futures and asked how it was possible that such concentrations could not be considered manipulative in both markets. Make no mistake, the silver market is the most manipulated market in the world. But gold is close behind.
For the record, I am neither a gold proponent or antagonist. I am a gold agnostic. I like to think that makes me more objective than most. I understand why people buy and hold gold, and I respect their reasoning. I study the facts concerning gold closely. If there were no such substance and story as silver, I would imagine I would be a gold proponent. Certainly, higher gold prices do not harm silver. I know there are times when gold is positioned to rise and fall and I try to analyze appropriately. While I profess to a neutrality on gold, I don’t profess to a neutrality on manipulation. The latest data from the CFTC confirm a manipulation in gold. Gold people should not tolerate it. Since there must be at least a hundred times more people interested in gold than are interested in silver, their collective voice could be forceful.
The evidence in the February Bank Participation report is clear - two or three U.S. banks held a record net short position equal to 15% of total world annual production of gold, a staggering and unprecedented number, exceeded only by the absurd percentage in silver (currently 20%). In every reasonable measurement of market share, two or three U.S. banks are completely dominating and controlling the gold market. All according to government data.
Who gave these U.S. banks the right to manipulate gold prices? The U.S. Treasury Department? Why are banks who are receiving taxpayer bailout funds even shorting gold and silver in the first place, especially at a time when so few other big entities chose not to? Shouldn’t they be looking to make loans to real people and businesses and leave market speculation to others? Are there no honest market regulators left? I sure hope gold people get to the bottom of this and give these crooks what they deserve.
Law & Order
I want to thank all who wrote to me about the recent testimony of Harry Markopolos before a congressional committee regarding his prior warnings to the SEC about Bernard Madoff. All compared this episode to my two-decades long campaign to get the CFTC to end the silver manipulation. If you haven’t heard or read Mr. Markopolos’s testimony, you should do so. It’s long, but it’s very instructive http://financialservices.house.gov/markopolos020409.pdf
In his statement, Mr. Markopolos highlights the SEC’s ineptness and arrogance, and comes up with a no-nonsense solution - fire and replace the entire senior staff who should have caught Madoff years earlier and revamp the structure for uncovering fraud. As far as the comparison to the CFTC, let me just note that it is widely acknowledged that the SEC is considered much more competent and alert than the CFTC. So, if the SEC could bungle and miss a major fraud for more than a decade, despite repeated warnings, is it not possible that a much smaller staffed agency could do the very same thing?
There was a sharp contrast between the television coverage of Mr. Markopolos’s testimony and what I usually watch on TV for entertainment. Most of my leisure television viewing time involves watching reruns of the show "Law & Order." It’s been that way for many years. I watch the show for much the same reason I imagine children watch Disney cartoons, namely, for fantasy escape purposes. Where Disney portrays heroic and kindly animal cartoon characters, "Law & Order" portrays dedicated public servants, police and prosecutors alike, who risk their lives and devote all their time to protecting society and upholding the law.
The show allows me to balance the reality I face each day with a nightly escape of what should be. There is no SEC ignoring credible warnings, nor a CFTC dismissing hundreds of bona fide complaints on any of the nightly reruns. Instead, the public servants on TV leave no stone unturned to get to the truth and let justice and the law prevail. Oftentimes, the TV public servants cross the line and are too aggressive in their pursuit of the bad guys and are reprimanded, with the resultant message that the rule of law must be observed at all times. The irony is that the fictional characters on TV have sworn to the same oath of office as have their real-life counterparts at the CFTC and other government agencies.
I accept that my TV viewing is fantasy and escape, as much as I accept that the CFTC is incompetent, uncaring or worse. The only issue is what to do about it? Live in a world where the law is upheld only on television, or bring pressure in the real world where it is not? For me, it’s an easy choice. I know I must do what I can to terminate the silver manipulation. That’s the primary purpose why I write publicly. Specifically, my role has evolved into presenting credible evidence of the manipulation and then trying to persuade you to pressure public officials to terminate the manipulation.
On a personal note, I’ll be speaking at the Phoenix Silver Summit on February 21 http://www.cambridgehouse.ca/phoenix.html
http://www.investmentrarities.com/tb-archives.html
Vindication
(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)
New data from the CFTC, provides the clearest proof to date of a manipulation in gold, thus vindicating the long-held position of GATA (the Gold Anti-Trust Action Committee). It is my hope and expectation that GATA, run by Bill Murphy and Chris Powell (Ed Steer, a director, is a close friend), will take the evidence and do everything in their power to ram it down the manipulators’ throats and end the gold and silver manipulation.
I would like to offer further evidence of manipulation with the intent of convincing the staff of the Enforcement Division of the CFTC of the continuing crime in progress. In somewhat of a twist, I would call on all gold proponents and investors to study this evidence, as it pertains mainly to gold futures trading on the COMEX. The evidence is found in source data published by the CFTC, in the form of their weekly Commitment of Traders (COT) and monthly Bank Participation (BP) Reports.
The Bank Participation Report for positions as of February 3, indicates that three or fewer U.S. banks hold a record short position in COMEX gold futures of 111,190 contracts (over 11 million oz). an increase of 28,690 contracts from the January report. The previous record short position by U.S. banks was 86,398 contracts in the August Bank Participation Report.
http://www.cftc.gov/marketreports/bankparticipation/index.htm
In other words, the current short position held by two or three U.S. banks is almost 30% greater than the previous record. After the previous record August short position was reported, gold prices fell almost $200 over the next two months. Will that happen again? I don’t know. What I do know is that if gold prices do suffer a sharp decline, it will only be because this manipulation by two or three U.S. banks was successful.
Allow me to put the concentrated short positions in gold and silver into perspective. As the February BP report indicates, one or two U.S. banks held a 29% share of the COMEX silver market and two or three U.S banks held a 32.1% share of COMEX gold futures. Of the 73 markets covered in the report, no other market has a U.S. bank percentage even close to silver and gold, save the smallest market listed, 90-day EuroYen Tibor (Although I have over 35 years of futures experience, I don’t know, nor do I wish to know, what that is).
Please keep in mind that the Hunt Brothers and all their reported associates had a futures market position (COMEX and CBOT combined) that was under a 10% share of the total silver futures contracts outstanding at that time and were charged with manipulation. What aren’t short positions three times as large also manipulative?
As large as the current gold and silver percentages of the market held by one, two or three U.S. banks may be, those percentages are grossly understated because spread positions are included in open interest totals. Remove all spread positions (non-commercial and commercial) and the share of the market held by one or two U.S. banks in silver rises to 41.5%, and not 29%. In gold, the share of the market held by two or three US banks is really 45%, not 32.1%. How could one or two traders holding 41.5% of any market, or two or three traders holding 45% of any market not be manipulative?
When the market share of the one, or two, or three U.S. banks in silver and gold are compared to the total share of all commercial traders, the result is truly shocking. In silver, the one or two U.S. banks account for more than 81.6% of the total net short position of all commercial traders. In gold the three or fewer U.S. banks account for more than 62.3% of all commercial shorts. With such a lion’s share, these big banks completely dominate and control the gold and silver markets.
Lastly, by comparing corresponding COT and BP report data from January 6 to February 3, I can make the following statement. The entire net increase in the commercial short position in silver and gold (2,500 contracts in silver and 28,000 contracts in gold) basically came as a result of new shorting by the big U.S. banks. In other words, neither the 5 through 8 largest traders, nor the 9+ commercial traders (the raptors) changed their positions much during that period. Almost all the selling was by the big U.S. banks in both silver and gold. Ask yourself this - what would the price of gold or silver have been if these big U.S. banks hadn’t sold short in such quantities? How can that not be manipulation?
It appears obvious that the CFTC began its current silver investigation as a result of revelations in my article "The Smoking Gun" http://www.investmentrarities.com/08-22-08.html and because many hundreds of you wrote in to the Commission. Without that public participation, there would have been no investigation. But one thing always puzzled me, namely, why did that investigation appear to center on silver? What about gold? After all, in my article, I highlighted the extreme concentration on the short side of COMEX silver and gold futures and asked how it was possible that such concentrations could not be considered manipulative in both markets. Make no mistake, the silver market is the most manipulated market in the world. But gold is close behind.
For the record, I am neither a gold proponent or antagonist. I am a gold agnostic. I like to think that makes me more objective than most. I understand why people buy and hold gold, and I respect their reasoning. I study the facts concerning gold closely. If there were no such substance and story as silver, I would imagine I would be a gold proponent. Certainly, higher gold prices do not harm silver. I know there are times when gold is positioned to rise and fall and I try to analyze appropriately. While I profess to a neutrality on gold, I don’t profess to a neutrality on manipulation. The latest data from the CFTC confirm a manipulation in gold. Gold people should not tolerate it. Since there must be at least a hundred times more people interested in gold than are interested in silver, their collective voice could be forceful.
The evidence in the February Bank Participation report is clear - two or three U.S. banks held a record net short position equal to 15% of total world annual production of gold, a staggering and unprecedented number, exceeded only by the absurd percentage in silver (currently 20%). In every reasonable measurement of market share, two or three U.S. banks are completely dominating and controlling the gold market. All according to government data.
Who gave these U.S. banks the right to manipulate gold prices? The U.S. Treasury Department? Why are banks who are receiving taxpayer bailout funds even shorting gold and silver in the first place, especially at a time when so few other big entities chose not to? Shouldn’t they be looking to make loans to real people and businesses and leave market speculation to others? Are there no honest market regulators left? I sure hope gold people get to the bottom of this and give these crooks what they deserve.
Law & Order
I want to thank all who wrote to me about the recent testimony of Harry Markopolos before a congressional committee regarding his prior warnings to the SEC about Bernard Madoff. All compared this episode to my two-decades long campaign to get the CFTC to end the silver manipulation. If you haven’t heard or read Mr. Markopolos’s testimony, you should do so. It’s long, but it’s very instructive http://financialservices.house.gov/markopolos020409.pdf
In his statement, Mr. Markopolos highlights the SEC’s ineptness and arrogance, and comes up with a no-nonsense solution - fire and replace the entire senior staff who should have caught Madoff years earlier and revamp the structure for uncovering fraud. As far as the comparison to the CFTC, let me just note that it is widely acknowledged that the SEC is considered much more competent and alert than the CFTC. So, if the SEC could bungle and miss a major fraud for more than a decade, despite repeated warnings, is it not possible that a much smaller staffed agency could do the very same thing?
There was a sharp contrast between the television coverage of Mr. Markopolos’s testimony and what I usually watch on TV for entertainment. Most of my leisure television viewing time involves watching reruns of the show "Law & Order." It’s been that way for many years. I watch the show for much the same reason I imagine children watch Disney cartoons, namely, for fantasy escape purposes. Where Disney portrays heroic and kindly animal cartoon characters, "Law & Order" portrays dedicated public servants, police and prosecutors alike, who risk their lives and devote all their time to protecting society and upholding the law.
The show allows me to balance the reality I face each day with a nightly escape of what should be. There is no SEC ignoring credible warnings, nor a CFTC dismissing hundreds of bona fide complaints on any of the nightly reruns. Instead, the public servants on TV leave no stone unturned to get to the truth and let justice and the law prevail. Oftentimes, the TV public servants cross the line and are too aggressive in their pursuit of the bad guys and are reprimanded, with the resultant message that the rule of law must be observed at all times. The irony is that the fictional characters on TV have sworn to the same oath of office as have their real-life counterparts at the CFTC and other government agencies.
I accept that my TV viewing is fantasy and escape, as much as I accept that the CFTC is incompetent, uncaring or worse. The only issue is what to do about it? Live in a world where the law is upheld only on television, or bring pressure in the real world where it is not? For me, it’s an easy choice. I know I must do what I can to terminate the silver manipulation. That’s the primary purpose why I write publicly. Specifically, my role has evolved into presenting credible evidence of the manipulation and then trying to persuade you to pressure public officials to terminate the manipulation.
On a personal note, I’ll be speaking at the Phoenix Silver Summit on February 21 http://www.cambridgehouse.ca/phoenix.html
http://www.investmentrarities.com/tb-archives.html
I have a very strict gun control policy: if there's a gun around, I want to be in control of it - Clint Eastwood
0
Comments
For every short, there is a long. Enough said
Well, I guess that's the proof we all needed that there is no manipulation in any of the commodity futures ....carry on.
roadrunner
<< <i>
Well, I guess that's the proof we all needed that there is no manipulation in any of the commodity futures ....carry on.
roadrunner >>
1. Gold is traded worldwide. The U.S. COMEX is only one of many places where gold is traded and prices established.
2. Demand for gold comes from around the world, including very heavily from Asia and Europe.
3. If gold's price is being manipulated downward on the COMEX, that would create an arbitrage opportunity for global players throughout the world.
4. There are only two logical possibilities that flow from the above:
First possibility is gold's price is not being manipulated (or even if there is an attempt at manipulation by the "PPT" or some other shadowy U.S. group, it's not effective).
Second possibility is that there is a massive global, worldwide conspiracy, like something out of a James Bond film, from India to Hong Kong to New York to Moscow, to keep down the price of gold. And that all banks, governments, and mega-wealthy individuals and hedge funds worldwide who could otherwise overwhelm the relatively small gold market have all somehow agreed to not do so, just to help out their friend the good old US of A (I'm sure Russia, China, Venezuela are all on board with that. Riiiiiight.)
Count me among those who subscribe to the first explanation.
The PPT or FOMC is not a shadowy group nor is it ineffective. Created by the Reagan administration in 1988 it is there to "stabilize" markets....whatever that means. Last month it meant raising gold short contracts by 28,000 or approx 15% of world annual production. Greenspan testified to Congress that the FOMC/Treasury stands ready to lease/sell gold as needed to control the pog and therefore the USD. I'd say that by the number of times the US stock market has jumped the opposite direction as expected...esp in the past year or the last few weeks, that the PPT is very effective in what they do. As soon as the Tarp bill is signed they'll call off their dogs (ie shorts) on the stock market.
Second possibility is that there is a massive global, worldwide conspiracy, like something out of a James Bond film, from India to Hong Kong to New York to Moscow, to keep down the price of gold. And that all banks, governments, and mega-wealthy individuals and hedge funds worldwide who could otherwise overwhelm the relatively small gold market have all somehow agreed to not do so, just to help out their friend the good old US of A (I'm sure Russia, China, Venezuela are all on board with that. Riiiiiight.)
All well and good, except Russia, China, Venezuela, don't control the monetary pulse of the world with a bank the size of JPM. JPM's shorts in gold, credit default swaps, and interest rate swaps dwarf any other bank in the world. The USA has JPM, and no one else does. Remember FED=Treasury=JPM=GS=world's reserve currency.
Count me among those who subscribe to the PPT theory. Putin and Co. are working hard enough as it is to get oil back on track so they can continue to apply pressure to our economy with higher oil prices. I guess you could call that an oil/energy conspiracy. China is right in the mix with Agri-products + energy/metals/minerals.
roadrunner
That's why I don't buy the story. That, plus the fact that gold has more than tripled in price this decade. The manipulation story just doesn't make sense.
any story about duplicity, manipulation, cabals and
world wide economic conspiracy, are now believable to me.
A small number of people have made obscene amounts of
wealth ,while hundreds of millions of people, around the world,
will now reap the bitter price.
Camelot
Since that's the way it is done, I would say that you do need a JPM and GS in the mix to control the gold market. Those other entities have better things to do. Best to leave the insider trading to those connected close to the Treasury. And with the deference to JPM's naked gold shorting, what cheaper way is there to do it? It defintely is easy to manipulate when you carry $100 BILLION in gold derivatives off your balance sheet. You don't even have to mess with the futures market and you can get the leverage for a few pennies on the dollar.
That's why I don't buy the story. That, plus the fact that gold has more than tripled in price this decade. The manipulation story just doesn't make sense.
You forget that to triple the gold market from $255/oz that somehow it had to find it's way down to those absurdly low levels from $875. Did other commodities such as food, copper, lumber, etc end up at 1/3 of their 1980 levels 22 years later? How about cars or other hard goods, did they fall 70% in price from 1980 to 2002? Don't also forget to include that on the food side, packaging has been sharply downsized and ingredients substituted for. There are many ways of hiding increasing food costs via dilution or expansion. The inflationary effects were so busy being funnelled into the equities and RE markets that no one seem to noticed that inflation really still existed. And to seal the deal all that was needed was to bury PM's. Even the gold miners hedged their forward production to take advantage of the carry trade between the Yen and higher interest rate sources. Everything came together perfectly to keep PM's down. Call it a perfect storm. Well, that storm is back again.
Don't you think that the gold carry trade and CB's selling/leasing off thousands of tons of gold in the 1990's and up to 2002 had something to do with that? Or were the banks really looking to just dump a barbarous relic? With the tripling in price from 2001, we still have only barely reached the 1980 peak price. Clearly, something is way out of whack here considering that gold was a good inflation monitor right up into the early 1980's. One doesn't have to dig all that far to figure it out. Go talk to Sumners and Rubin about their gold supression schemes from the 1990's. Sumners and Greenspan have admitted to such in public. What else is there to say?
roadrunner