Commodity Futures Trading Commission (CFTC)

March 1, 2011 | PoliticalMetals

Providing Oversight With One Eye Closed

The U.S. Commodity Futures Trading Commission (CFTC) is an independent agency that regulates the commodity futures and option markets in the United States. COMEX, the commodities exchange that trades gold and silver futures and options contracts, is under its jurisdiction.

Over the years, numerous complaints about market manipulation in the COMEX have been brought to the CFTC’s attention, but to date, nothing positive has resulted. Over two years ago, the CFTC commenced an investigation based on a claim that large traders, like banks, had been selling huge amounts of silver on the futures market to keep prices down. A substantial short position - believed to be equivalent to 25% of the annual global mining supply of silver.

Bart Chilton, CFTC Commissioner

In October 2010, Bart Chilton, one of the commissioners said:

I think the public deserves some answers in the very near future.

…. I expect the CFTC to say something on our silver investigation within weeks. I can’t pre-judge what that will be. I can’t even guarantee that the agency will speak. That said, if the agency remain silent for much longer, I intend to speak out on the matter in an appropriate fashion.

Investors and organisations who have been making allegations about silver and gold price manipulation for decades were hopeful that a conclusion of the investigation was forthcoming.

Till this day, nothing. Surprised? No. Here are a few reasons why.

(1) When George H. Painter, 83, one of only two administrative law judges for the CFTC announced his retirement, he detonated a bombshell. In his retirement “Notice and Order” dated September 17, 2010, he accused his lone colleague on the CFTC bench, Bruce Levine, of having made a vow nearly 20 years ago never to rule in a complainant’s favor. He added:

A review of his (Judge Levine) rulings will confirm that he has fulfilled his vow.

He went on to provide records to support his case. This was the news carried on CNBC and here’s his “Notice and order“. Shocking, to say the least - that a suppossedly independent body providing oversight has for nearly 20 years characters of this nature operating within.

(2) This was what silver analyst, Ted Butler wrote on August 22, 2008

Theodore Butler

For years, the data contained in the weekly Commitment of Traders Report (COT), issued by the CFTC, have indicated that several large COMEX traders have manipulated the price of silver and gold. For an equal number of years, the CFTC has reluctantly responded to public pressure over this issue with blanket denials of any wrongdoing. Many analysts have agreed with the CFTC’s position, conjuring up various ways to explain why a massive short position held by a handful of traders is not manipulative.

The recent widespread shortage of silver for retail purchase coupled with a price collapse appears to have shaken these analysts’ confidence that the COMEX silver market is operating ‘fair and square.’ Well it should, since there is no rational explanation for a significant price decline going hand in hand with product shortages other than collusive manipulation.

For any remaining doubters that COMEX silver and gold pricing is manipulated, the following CFTC data should be considered. This data is taken from a monthly report issued by the CFTC, called the Bank Participation Report. Here’s the link for the report - http://www.cftc.gov/marketreports/bankparticipation/index.htm

The relevant data is found in the July and August futures sections. I will condense it.

Read his analysis of the CFTC report in The Smoking Gun.

(3) On March 25, 2010, the CFTC held a public hearing on the Metals market. Here’s the comments submitted before the hearing by Adrian Douglas providing compelling evidence proving price suppression of gold and silver on the Comex.

(4) Also presented at the above public hearing was the case where a a London trader, Andrew Maguire, walked the CFTC through a silver manipulation operation in advance.

In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events.

On February 3 Maguire gave two days’ warning by e-mail to Eliud Ramirez, a senior investigator for the CFTC’s Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5. On February 5, as market events played out exactly as predicted, further e-mails were sent to Ramirez while the manipulation was in progress.

It would not be possible to predict such a market move unless the market was manipulated.

You can read the rest ofthe story as revealled in the Additional Statement by Bill Murphy, Chairman, Gold Anti-Trust Action Committee to the U.S. Commodity Futures Trading Commission. Washington, D.C., March 25, 2010.

(5) These two video clips of the hearing cover discussions on gold being traded like a financial instrument on a fractional reserve banking concept - that for every oz of “paper gold” traded, there is only about 1/100th of an oz of the real metal.

(6) Finally, let’s look at an interesting speech by Commissioner Bart Chilton before the High Frequency Trading World, USA 2010 Conference, New York, NY on High Frequency Trading (HFT) and the OTC market. It’s aptly entitled “Speed“.

Putting all of the above together, we can conclude that if the CFTC had been playing its role as a market oversight, gold and silver price manipulations could not have gone to the extend it did. They, together with the bullion banks acting as agents of central banks have been holding the ball under water. This cannot continue forever. We’re beginning to see signs that they are loosing their grip. How gold, and in particular, silver have been breaking out over the last few months confirms this.