Political Metals

After another take down yesterday, gold bounced back to the $1,600 handle and silver above $40 in the Comex Access market today. Gold/Silver ratio dipped briefly below 40.

On the surface, MSM commentators attributed Tuesday’s  sharp 3.7% drop in silver to Obama’s positive announcement about the debt ceiling negotiations.

Behind the scenes however, a more sinister effort to manipulate the silver market was unfolding, as described by BrotherJohnF and Silvergoldsilver below.

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While BrotherJohn thinks that someone sold or “dumped” 50,000 silver contracts (equivalent to 250M ounces of paper silver or $10B worth of physical silver, or in excess of 1 whole year’s of silver production in the US) in one minute, a more probable scenario would be that it was a result of bullion banks’  High Frequency Trading (HFT) algorithms doing their thing to place the price of paper silver anywhere on the chart that suits them and the powers that be at that point in time. Remember that one minute is an eternity in the world of HFT, where transactions happen in the microseconds. Thousands of trading back and forth within or amongst the Cartel members within that 1 minute could produce the cumulative result discussed in that video.

Related reads on HFT

• High Frequency Trading in Commodities
• “Speed”: Speech by CFTC Commissioner Bart Chilton before the HFT World
• Ted Butler’s 5 Questions for Gary Gensler, Chairman of the CFTC
• Silver might crash?

If you don’t mind a little rough language, here’s Silvergoldsilver’s “SLV manipulation July 18th” video capturing the manipulative trades on the SLV ETF before the take down.

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Despite the paper price suppression,  several positive outlooks for PMs were recorded at King World News:

• Sean Boyd - Expect $2,200 to $2,400 Gold & $60 to $75 Silver July 21, 2011
• Hathaway - Gold Breakout & Subsequent Trading Encouraging July 20, 2011
• Peter Schiff - Silver Will Eventually Trade Over $200 July 20, 2011
• Embry - Possible High Triple Digit Silver Before This is Over July 19, 2011
• Turk - Expect a Tidal Wave of Buying & Short Covering in Gold July 19, 2011
• London Trader - Potential for Major Short Covering in Gold July 18, 2011

And finally, it’ll be interesting to see what happens when Hong Kong Mercantile Exchange launches silver futures trading tomorrow.