U.S. Government Officially Receives Evidence of Gold and Silver Price Manipulation

Whistleblower Documents JPMorgan Chase Silver Price Suppression

By Patrick Heller
Liberty's Outlook

       I try to write eye-catching headlines for my newsletter while trying to avoid being overly dramatic.
       This month, it can't be helped. The reality of multiple recent sensational news developments is bound to have a strong impact on gold and silver prices.
       You need to know about and understand what is happening so that you can take prompt action to protect your own finances.
       On March 25th, the US Commodity Futures Trading Commission (CFTC) held hearings on the possible imposition of commodity futures and options trading limits in the precious metals markets. Fourteen speakers accepted invitations to make presentations.
       This hearing came about in part because of long-term complaints from organizations such as the Gold Anti-Trust Action Committee (GATA) and individual analysts such as Ted Butler, Reg Howe, James Turk, Frank Veneroso, and Adrian Douglas that the gold and silver commodity markets have been subject to blatant extensive price suppression manipulation by the US government and its trading partners.
       Speakers included Bill Murphy, chairman of GATA, and Harvey Organ, an individual investor.
       Murphy was given five minutes to document the history of gold and silver price suppression. To provide the maximum information possible into the official record of these proceedings, Murphy raced through a longer speech in just five minutes. It was not graceful, but Murphy introduced a lot of evidence into the record that CFTC officials can no longer pretend not to know.
       After his remarks, Murphy was asked by CFTC commissioner Bart Chilton for specific instances where such manipulation had occurred. This was the opening for Murphy to reveal a bombshell.
       In November 2009, Andrew Maguire, a former Goldman Sachs silver trader in their London office, had contacted the CFTC Enforcement Division to report the illegal manipulation of the silver market by traders at JPMorgan Chase. He described how these silver traders bragged openly about their actions, including how they gave a signal to the market in advance so that other traders could make a profit during the price suppressions.
       Maguire had a series of emails with Eliud Ramirez of the CFTC Enforcement Division explaining how the manipulations were tied to the Bureau of Labor Statistics monthly release of non-farm payroll figures and other recurring events.
       On February 3, 2010, Maguire sent an email to Ramirez and commissioner Chilton saying that JPMorgan Chase had signaled that the price of silver would be knocked down upon the announcement of the non-farm payroll report at 8:30 AM on February 5. Maguire then sent them emails on February 5 as this suppression was in process, pointing out that it would not be possible for him to have such accurate advance information if the markets were not actually being manipulated by JPMorgan Chase.
       Silver on the COMEX closed at $16.74 on February 2 and at $14.82 on February 5, a drop of 11.5%, so this manipulation caused a significant loss to those whose margin accounts were sold out by this move.
       Maguire had asked to be invited to speak at the CFTC hearings. When he was not, he contacted GATA on March 23 to ensure that this information was made public at the CFTC hearings.
       When I met Murphy at the ANA National Money Show two days after the CFTC hearings, he told me that the CFTC commissioners all went pale as he described exactly how the CFTC was provided this detailed information about silver price manipulation but had done nothing about it.
       During Harvey Organ's presentation, a question came up about whether large short positions on the London Bullion Market Exchange also reflected efforts to suppress gold and silver prices. Adrian Douglas, a researcher in oil, gold, silver, and copper markets who is a member of the board of directors of GATA, was permitted to address the hearing on this issue, a subject he has studied extensively. Douglas pointed out that the huge volume of trading levels in the London market (averaging $22 billion per day) could not possibly be settled by delivery of physical metals. To this point, the commissioners asked Jeffrey Christian, one of the other speakers who runs CPM Group (one of the most respected precious metals consultancies) whether Douglas's contention that the London gold and silver markets could not be settled by delivery of physical metal for all the contracts. Christian rejects the concept that the gold and silver markets are being manipulated, but he did confirm Douglas's analysis.
       Contracts on the London market are theoretically only supposed to be settled by delivery of physical commodities. In effect, the commissioners were told that almost all of the gold trading activities on the London exchange were merely settled by paper for paper, not for physical metals. Further, the commissioners were told that it was impossible for the London exchange to deliver all the gold and silver owed to the owners of contracts as the amounts owed exceed several decades of future global mining output.
       After the hearing, GATA publicly released copies of Maguire's emails with the CFTC. They also revealed that Maguire had recorded all of his telephone conversations with the CFTC without asking for their permission to do so. This is legal to do in Britain, but such recordings cannot legally be provided to other parties. GATA is currently working to ensure that these recorded conversations can be legally released to the public.
       Now that this information about silver price manipulation and about the massive shortage of physical gold and silver on the London exchange is part of the official record, I expect huge fallout.
       Remember, after the five men were arrested for breaking into the Democratic National headquarters in Watergate in June, 1972, it took more than two years for President Nixon to resign. I don't think it will take anywhere near that long for the March 25th revelations to blow back against the US government and the US dollar. Once the public realizes the extent of the manipulation, gold and silver prices are likely to skyrocket.
       I expect that the trail of gold and silver price manipulation will eventually be traced back to the US government, potentially resulting in the largest political scandal since Watergate! It is not beyond the realm of possibility that this development may lead to the crash of the US dollar.
       I think the CFTC hearings will be the beginning of the end for those trying to suppress gold and silver prices. If you would like to view what happened yourself, please check the CFTC video clips at http://www.capitolconnection.net/capcon/ cftc/032510/CFTCwebcast.htm.

Has The Fallout Already Started?

       I believe that the fallout from the CFTC hearings has already started. Since the hearings, there are persistent rumors that JPMorgan Chase has been covering some of the silver short positions in the past two weeks, which could explain why the spot price of silver is up almost 10% recently.
       Another rumor is that HSBC, the bank considered as holding the largest short positions in the gold market, is also covering some of these short positions. If true, this would help explain the roughly 5% rise in the gold price since the CFTC hearings.
       Actually, the representative of HSBC who spoke at the CFTC hearings has already has been caught lying. He claimed that there was a huge volume of physical gold available on the market and that HSBC stood ready to accept an order for one million ounces, with delivery in one business day. Well, I have received a report that someone did recently try to place an order for one million ounces of gold with HSBC through the London Bullion Market Association. After three days, HSBC (and every other market maker in London) had still refused to even accept the order, much less take steps to affect fast delivery.
       The information provided by Murphy and Douglas to the CFTC has been subject to almost a total blackout by the US mainstream media.
       However, there have been several financial writers who, for the first time, have taken note of the information about the manipulation of the gold and silver prices. I expect coverage of this issue will grow over time, building pressure for more of the truth to be revealed.
       Actually, there has been significant coverage of this story by the international media. Murphy has been interviewed for television broadcasts and newspaper stories across Europe, including Russia. There is heavy Internet traffic in China as well.
       Perhaps the most important result we are starting to see is the further deterioration in confidence of the future value of the US dollar. On April 5th, the interest rate on US 10-year Treasury debt briefly topped 4%, its highest level in nine months. As I write this, it is just below that threshold.
       The US government, behind the scenes, has been doing everything possible to keep this key interest rate below 4%. A rising interest rate is a signal to foreign buyers of US Treasury debt that the value of the dollar is at a higher risk of a near term decline in value.
       A higher 10-year Treasury debt interest rate would negatively impact the ability of Americans to buy homes or invest in job- creating businesses. It would also alert people that the effects of the US government's massive inflation of the money supply, to finance huge budget deficits, might begin showing up in sharply higher consumer prices.
       I speculate that there is a lot of fear among the upper echelons in Washington right now over this rising interest rate. It is so important that President Obama was compelled to speak on Monday to call for the Chinese to allow their currency to trade at "free market levels." In effect, the president is already trying to deflect the blame for the forthcoming falling value of the dollar.
       The US dollar has looked strong so far this year, but pretty much only in relation to European currencies such as the British pound, Euro, and Swiss Franc. In the past few weeks, the US dollar has declined against the Canadian dollar, Mexican peso, many South American currencies, and most Asian currencies other than China and Japan, which I think gives us a clue where the dollar is generally headed. At the beginning of this year, I anticipated that the price of gold would top $1,300 by the end of March. Later, I pulled back on that prediction, saying only that I expected it to surpass the former all time high of a bit over $1,200 set in early December 2009. That didn't happen - yet. The best information I have is that the U.S. government and its trading partners engaged in such extensive and blatant manipulation of gold and silver prices thus far in 2010 that they succeeded in restraining precious metals prices in the first quarter. But it looks like all of this effort will soon be for naught. Gold, silver, platinum, and palladium prices are moving upward. They won't go in a straight line. I now expect that gold will reach a new all-time high price (ignoring inflation) by the end of April and that silver could break through the $20.00 level to stay. Further, I expect that demand for physical metals will rise as holders of "paper gold and silver" realize their contracts may not actually represent ownership of gold and silver. This could result in something like a two-tier market, where the prices of physical metals are far higher than prices for London or COMEX contracts, shares of exchange traded funds, or certificates of storage. If you want to own gold and silver for insurance against further calamities to your paper assets like stocks and bonds, I urge you to act right away. Next month may be too late.