Tuesday, October 26, 2010

An Honest Man In An Amoral World?

Gold began today under a bit of pressure because of the bid in the Dollar following Bank of Japan officials efforts to "talk the Yen lower"...good luck with that fellas.

It looked like another range bound day of trading for the Precious Metals ahead of next week's Fed meeting, and then late this morning CFTC Commisoner Bart Chilton stepped up to the microphone during today's U.S. Commodity Futures Trading Commission Public Hearing on Anti-Manipulation and Disruptive Trading Practices.

Thank you Bart!

Chilton: There Have Been 'Fraudulent Efforts' To Control Silver Prices
WASHINGTON (Dow Jones)--A federal futures regulator said Tuesday he believes there have been numerous attempts to fraudulently influence silver market prices, and he urged the agency to prosecute those who may have violated commodities laws.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission, made his comments Tuesday at the start of a public meeting where the agency will be proposing new rules to strengthen its anti-fraud and anti-manipulation powers.

The agency's enforcement division for over two years now has been probing the silver market amid a flurry of complaints by investors who have raised fears about potential price manipulation. The CFTC hasn't provided any updates on the investigation, and Chilton said he thinks "the public deserves some answers to their concerns that silver markets are being, and have been, manipulated."

"I believe there have been repeated attempts to influence prices in the silver markets," he said. "There have been fraudulent efforts to persuade and deviously control that price."

He urged prosecution of those who may have violated the law, but said he can't prejudge what the agency will do with its investigation.

Statement at the CFTC Public Meeting on Anti-Manipulation and Disruptive Trading Practices
By: Commissioner Bart Chilton
I take this opportunity to comment on the precious metals markets and in particular the silver markets. More than two years ago, the agency began an investigation into silver markets. I have been urging the agency to say something on the matter for months. The public deserves some answers to their concerns that silver markets are being, and have been, manipulated.

The legal definition of manipulation under the law is a high bar to prove. It is a much different test than what the average person might consider as manipulation. Under existing law, to prove manipulation, the government is required to demonstrate not only specific intent, we also need to prove that as a result of the intent and market control, that activity caused an artificial price—a point which can certainly be debated by economists. Attempted manipulation is less difficult to prove—requiring an intent to manipulate and some overt act in furtherance of that intent. There are also other violations of law that could contort markets and distort prices.

I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by members of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.

In saying this, I am fully aware of the prohibition from divulging trader names or information about their positions. I am extremely careful not to violate the law in this, or any, regard. I also cannot pre-judge anything the agency may do with regard to our silver investigation, or any other matter.

The Wall Street Reform and Consumer Protection Act, which I strongly supported, contains new manipulation provisions as well as antidisruptive trading rules. These new authorities, along with the implementation of thoughtful position limits in metals will go a long way toward ensuring more efficient and effective metals markets devoid of fraud, abuse, and manipulation.

Thoughtful investigations take time. The CFTC staff has worked extremely hard on the silver investigation. That said, there is a point at which it is our responsibility to say something. Within the law, I have done so. I am hopeful that the agency will speak publicly about the investigation in the very near future and when they do so that it will be in a more granular fashion than I am permitted from doing at this time.


Silver prices began to move higher as news of Commisioner Chilton's tongue lashing made it's way across the wires. The move became explosive once the CRIMEX closed and Precious Metals options expired for next month. Silver cleared 24 as the NY open access market reopened at 6PM est.

Trader Dan Norcini said it best in his daily post on http://www.jsmineset.com/

Hourly Action In Gold From Trader Dan
By: Dan Norcini
The silver market was abuzz with news today about CFTC Commissioner, Bart Chilton, concerns over price manipulation. The fact that he has come out so publicly took many, outside the camp of GATA and others, by surprise and lit a fire under that market which took it up into a resistance area near $24 on the charts. Strength in silver then worked to pull up gold which had been under pressure from the falling Euro and the subsequent bounce towards 78 in the Dollar.

You have to wonder about the many who have insulted GATA and its fine work over the years and ridiculed them in such a derogatory fashion whether they will now have the common decency to apologize for their shameless and contemptuous treatment of my friends Bill Murphy and Chris Powell and all the other dedicated members of the GATA board. The fact that Commissioner Chilton has come out so forcefully and chosen to use the words, “fraudulent” and “devious” in regards to the silver market is remarkable for its clarity and frankness. He was careful not to come to a conclusion about actual manipulation but as he pointed out, attempted manipulation is an entirely different matter. Based on his own words, it is evident that he strongly believes that attempted manipulation has been occurring regularly.

From here on, those who refer to GATA and its supporters as “the tin foil hat” crowd are only making fools out of themselves and revealing themselves to be mere hacks of the bullion bank crowd. GATA can no longer be dismissed as some sort of rogue band of disgruntled “gold bugs” but as the fine group of people that they are; people who share a genuine concern for the integrity of our financial markets and whose tireless research and efforts on the part of the precious metals markets deserves to be given the respect that is due to any organization which has produced work of the nature and quality that GATA has. I am not holding my breath however; very few are able to conquer their own pride and remain slaves to it all their lives. It takes a man of real character to admit he was wrong. Generally speaking, the most vocal opponents of GATA seem lacking in this department.

Hats off also to Commissioner Chilton for having the integrity to follow through on this even in the face of what no doubt must have been some very strong opposition. It is refreshing to see a man who actually takes what he does seriously and is working in the interests of the general public and not just a few favored special interests. If you have not done so, please take the time to send him an email encouraging him and thanking him for his efforts. So often men in his position only get emails or letters haranguing them.

Back to gold – it has reinforced its range trade after failing to take out $1,350 on the topside and moving lower back within its box that is defined by $1320 on the bottom and $1350 on the top. I still think it will work this range ahead of the next FOMC meeting in early November barring any drastic moves in the Dollar. Silver, even though it responded nicely to the Chilton news, has yet to break above $24 on the topside, which is the level it needs to best to give it a shot at $25 once again.


John Embry - Gold & Silver Commercial Signal Failure
By Eric King, KingWorldNews.com
John Embry, Chief Investment Strategist for Sprott Asset Management, believes the long awaited commercial signal failure in gold and silver may be at hand: “...demonstrated by an explosion in open interest on the Comex as the usual suspects shorted aggressively in an attempt to mitigate the relentless buying that was occurring. This, I suspect, will result in either another correction, which should be short and shallow, or more probably, the long-awaited commercial signal failure in which the shorts are overrun and forced to cover in a rising market.”
October 25, 2010

John Embry continues:

“With the economic outlook deteriorating, more quantitative easing on the horizon globally, currency unrest mounting everywhere and physical supplies of gold and silver dwindling, the powers-that-be have their work cut out for them if they hope to keep the prices of gold and silver in check.

The suggestion that gold is in a bubble phase is the latest tactic of the anti-gold crowd, whose predictions, incidentally, for the price of gold and silver have now been consistently wrong for 10 years.

Jimmy Rogers, who is one of the world’s leading authorities on commodities, dealt with the bubble issue recently by recounting an interesting anecdote. While addressing a group of high-end money managers, he inquired as to how many of them held gold or silver in their accounts and, remarkably, 75 percent replied that they had never owned either precious metal.

As far as I’m concerned, that put to rest any idea that we are even remotely close to a bubble in gold or silver. When gold is trading at several multiples of the current price at some point in the future, you can be assured that every single person at a similar gathering would be long and then discussion of a bubble might be legitimate. In my considered opinion, we are many years and thousands of dollars in price away from that debate.”

Investors should continue to use weakness in gold and silver to accumulate both metals. Buy gold & silver and take delivery of the physical, do not use paper instruments. These monetary instruments will have you outside of the system, which will in all likelihood collapse at some point.


James Turk - Gold & Silver Will Breakout to the Upside
Eric King, KingWorldNews.com
With gold and silver strong in Asian and European trading, King World News interviewed James Turk out of England to get his thoughts on the price action. Turk commented, “Hat tip to Gene Arensberg, I think he has got it nailed with this technical flag pattern on silver that he brought up in the KWN Weekly Metals Wrap. What I think is going to happen is we will break out of this flag pattern to the upside, and it’s going to stay strongly overbought for another 3, 4 or 5 weeks. ”
October 25, 2010

Turk continues:

“There is also a flag pattern in gold which means that both markets are in sync, and are ready to move higher. And keep in mind Eric, that we are still below 58 on the gold/silver ratio, meaning that silver is showing good relative strength. That is a bullish sign for both metals. My target is still 50 to 52 for the gold/silver ratio on this leg up of the bullish move.

I’m still looking for $30 on silver, which means we would have a target of around $1,500 on gold. One last thing Eric, I think Dan Norcini also made a good point in the KWN Weekly Metals Wrap this week when he gave the reasons why the mining shares have been underperforming the bullion itself.

The strategy has worked well for the hedge funds because the input costs had been rising faster than the gold and silver price, thereby squeezing the margins of the mining companies. But that is now changing Eric, as evidenced by some of the fantastic earnings and free cash flow the mining companies are now generating.

Eric, when I view gold and silver and the mining shares, I view them entirely differently. The shares are an investment, but bullion is money. If you want to take some of your hard earned money and invest it in the shares, now is the time to do it. When I was last interviewed on King World News I said that the bull market in the shares starts now.”

Well there you have it, first we heard from John Embry in the earlier piece on the blog, now James Turk. The market is acting extremely healthy here, and both Embry and Turk know we are headed significantly higher from current levels during the course of this secular bull market. And yes, there is a chance the pullback is over. We’ll keep our eyes on the previous highs in both gold and silver.


Gene Arensberg: Big commercial shorts not piling on in gold and silver

G20 forswears currency, trade wars but sniping starts right up again

Goldman says Fed faces $4 trillion hole
by Colin Barr
Economists at Goldman Sachs estimate the Federal Reserve may need to buy a staggering $4 trillion worth of assets such as Treasury securities to get the economy rolling again.

The Goldman economists, Jan Hatzius and Sven Jari Stehn, don't expect the Federal Reserve to go nearly that far when it resumes its asset-purchasing quantitative easing policy. Citing many officials' unease with the prospect of adding significantly to the Fed's already bloated balance sheet, Goldman expects the Fed to end up buying around $2 trillion worth of assets over the next few years.

But even the lower Goldman estimate at least doubles the size of the purchases most observers have been saying they expect the Fed to target when it unveils so-called QE2 at its meeting next week.

"The key strategic question is not the size of the first step, but how far Fed officials will ultimately need to move in order to achieve their dual mandate of low inflation and maximum sustainable employment," Hatzius and Stehn write.

Hatzius and Stehn say that with unemployment near 10% and inflation falling, there is no reason to believe the widely anticipated, modest second round of quantitative easing will pull the economy out of its funk. Economists have been bandying about figures between $500 billion and $1 trillion, though some suspect the Fed will stop short of using numbers even that large and simply announce a plan to buy $80 billion to $100 billion worth of Treasurys till conditions improve.


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