By Patrick A. Heller on April 7th, 2010
At the March 25th Commodity Futures Trading Commission (CFTC) hearings on the possibility of imposing trading limits on gold and silver futures and options contracts, three speakers were able to enter into the record detailed information about the manipulation of gold and silver prices.
Bill Murphy, the chairman of the Gold Anti-Trust Action Committee (GATA), listed background information on multi-year price suppression practices. In response to a follow-up question from CFTC commissioner Bart Chilton for a specific instance of manipulation, Murphy described the exchange of emails and telephone calls between former Goldman Sachs (London office) silver market trader Andrew Maguire and the CFTC enforcement division. Maguire blew the whistle on the price suppression activities of the JPMorgan Chase silver traders in London that were so blatant that these traders even bragged about it.
Murphy specifically referred to Maguire’s emails to the CFTC Enforcement Division on February 3, 2010 which alerted them that JPMorgan Chase had given a signal that it would be knocking down the price of silver right after the Bureau of Labor Statistics released its monthly non-farm employment data at 8:30 AM on February 5. He also revealed that Maguire had sent emails to them as this very manipulation was in progress on February 5.
Adrian Douglas is an analyst of oil, gold, silver, and copper markets who also is on the board of directors of GATA. At the CFTC hearings, he was able to discuss how the London Bullion Market Association, the world’s largest gold trading venue that supposedly only trades contracts for physical delivery of gold, had actually turned into an almost completely paper-gold market, with less than one ounce of gold in inventory for every 100 ounces of gold theoretically due for physical delivery on that exchange.
This information was devastating to the claim by many analysts and those in the mainstream financial press that the gold and silver market prices are not manipulated by the US government and its trading partners. Ordinarily, you would think such significant revelations would get major news coverage.
So what actually happened?
Before the hearings commenced, Bill Murphy had lined up some post-hearing interviews with multiple US financial media including, among others, Reuters and (I think) Bloomberg. Every one of his US interviews was suddenly canceled.
Within 24 hours of being identified as a whistle-blower, the car in which Andrew Maguire and his wife were riding was struck by a hit-and-run driver. The Maguires were briefly hospitalized, but survived.
On March 30, Maguire and Douglas were interviewed for 40 minutes on King World News to further discuss the market manipulations brought up at the CFTC hearings. The next day, King World News broadcast a half hour interview on the same subjects with Murphy, Douglas, and another GATA director named Chris Powell. On March 31, from 8-10 PM, King World News’s website was shut down with a sophisticated "distributed denial of service" attack that brought down the entire grid of the host company.
Another website that posted information about the market manipulation testimony at the CFTC hearings also went down for a few hours because of a distributed denial of service attack. Again the website hosting company, which includes Sony and Toyota among its other clients, was surprised that the attack could overwhelm its high level of defenses.
In the twelve days since this evidence was presented at the CFTC hearings, there have been no statements of denial coming from JPMorgan Chase, Goldman Sachs, or any US government agency. The lack of coverage by mainstream US financial media is notable by its absence.
Outside of the US, this evidence has received extensive coverage. Murphy and Maguire have been interviewed for broadcasts in many European nations, including Russia.
I think we are already seeing market fallout from the information presented at the CFTC hearings. The price of silver is up roughly 8% since then. There are rumors that JPMorgan Chase may be buying back some of its silver short positions, which would tend to cause this rise. It has even been hinted that HSBC may be closing out some of its gold short positions, which may be a factor in the recent rise in that price.
Another possible fallout is that the interest rate on 10-year Treasury debt has been increasing. Yesterday it closed at 4%, the highest level in nine months. This is my trigger point to indicate lack of foreign confidence in the value of the US dollar, which could spark a near term decline. Should the dollar fall, gold and silver will almost certainly rise—perhaps by a lot in a short time. It looks like the potential for a falling dollar is so much of a concern at high levels in the US government that even President Obama yesterday went out of his way to urge the Chinese to allow its yuan currency to float (i.e. rise) to a free market rate.
Most Americans are in the dark about some important issues affecting the values of gold, silver, and the US dollar. I mourn for them. By the end of April, I expect that will wish they could have read the news that is widely available outside the US.
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes "Liberty's Outlook," a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/