Tuesday, March 30, 2010
Last Thursday, the Commodity Futures Trading Commission held hearings on the possible imposition of commodity futures and options trading limits in the precious metals markets. Each of the five commissioners plus two CFTC staff members made presentations. In addition, 14 outside parties 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 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 U.S. government and its trading partners.
Among the outsiders making presentations at this hearing were Bill Murphy, in his capacity as chairman of GATA, and Harvey Organ, an individual investor.
Murphy was advised to expect a strict time limit of five minutes for his presentation, even though the CFTC chairman Gary Gensler had the option to allow more time. In order to provide the maximum documentation possible into the official written record of these proceedings, Murphy raced through his 6-1/2 minute oral presentation in just five minutes. It was not a graceful presentation, but Murphy introduced a lot information into the record that the CFTC can no longer pretend not to know.
After his formal remarks, Murphy was asked by commissioner Bart Chilton if he could provide some specific instances where such manipulation had occurred. This was the opening for Murphy to introduce a bombshell.
In November 2009, Andrew Maguire, a former Goldman Sachs silver trader in that firm’s 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 the JPMorgan Chase 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 e-mails 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 Feb. 3, 2010, Maguire sent an e-mail to Ramirez and commissioner Chilton saying that he had observed the JPMorgan Chase signal that the price of silver would be knocked down upon the announcement of the non-farm payroll report at 8:30 a.m. on Feb. 5. Maguire then sent them e-mails on Feb. 5 as this suppression was in process, pointing out that it would not be possible for him to have such accurate advance information about this development if the markets were not controlled by JPMorgan Chase.
Maguire asked to be invited to speak at the CFTC hearings this past Thursday. When he was not invited, he contacted Adrian Douglas, another director of GATA, on March 23 to supply this information to be made public at the CFTC hearings. Murphy filled Maguire’s request in response to Chilton’s question asking for specific instances of price manipulation. When I saw him Saturday, Murphy 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 not yet done anything 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 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 manipulated, but he did confirm Douglas’s analysis.
In effect, the commissioners were told that almost all of the trading activities on the London exchange were merely settled by paper for paper, not for physical metals as the exchange supposedly requires. Further, the commissioners were told that it was impossible for the London exchange to ever deliver all the gold and silver owed to the owners of contracts.
After the hearing, GATA publicly released copies of Maguire’s e-mails with the CFTC. Murphy 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.
This past Saturday, Murphy addressed a full room with his Numismatic Theatre presentation at the American Numismatic Association convention in Fort Worth. There, he shared much of the breaking information he provided to the CFTC commissioners. Little did we know at the time, but at about then Andrew Maguire’s car, in which his wife and he were riding, was struck by a hit-and-run driver. Both Maguire and his wife were briefly hospitalized. The police eventually arrested the other driver. The Maguires may be considered more than lucky. There are other past would-be whistle blowers about the manipulation in gold and silver markets that died in unusual accidents before they were able to bring forth their evidence.
Curiously, the live television broadcast of the CFTC hearing suffered a technical failure right as Murphy was set to begin his testimony. This was corrected right after Murphy was finished. At the same time, at least one live voice broadcast failed during Murphy’s presentation. Coincidence?
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 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 this long for last Thursday’s revelations to blow back against the U.S. government and the U.S. dollar. Once the public realizes the extent of the manipulation, gold and silver prices are likely to skyrocket.
I think this hearing 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 video clips listed below.
• To view Bill Murphy’s prepared statement to the CFTC, see http://www.youtube.com/watch?v=9wIMpe9SjfQ
• To view Bill Murphy’s citation of specific instances of silver market price manipulation to the CFTC, see http://www.youtube.com/watch?v=e9bUOr6JP4s
• To view Adrian Douglas’s discussion of the Ponzi-like gold trading on the London Bullion Market Exchange to the CFTC, see http://www.youtube.com/watch?v=jok3XLBz_SI
• To view all or part of the March 25 CFTC hearings, see http://www.capitolconnection.net/capcon/cftc/032510/FCTCwebcast.htm
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” the company’s monthly newsletter on rare coins and precious metals subjects. Reprinted with permission.
For further reading:
"It's Ponzimonium in the Gold Market", Nathan Lewis, March 31, 2010
"The Coming Precious Metals Short Squeeze", John Rubino, March 30, 2010
"CFTC Hearing; Poised to Act!", Jason Hommel, March 30, 2010
"Former Goldman Commodities Research Analyst Confirms LBMA OTC Gold Market Is 'Paper Gold' Ponzi", Zero Hedge, March 28, 2010
"Dispute over curbs on metal futures", Gregory Meyer, Financial Times, March 26, 2010
"A great day at the CFTC, and another one's coming", Gold Anti-Trust Action Committee Inc., March 25, 2010
"Whistleblower Exposes JP Morgan's Silver Manipulation Scheme", Zero Hedge, March 25, 2010
"Comments for the Commission for the Public Hearing on the Metals Markets", Adrian Douglas, March 25, 2010