JPMorgan, HSBC sued for alleged silver conspiracy

By Jonathan Stempel

NEW YORK | Wed Oct 27, 2010 6:20pm EDT

NEW YORK (Reuters) - JPMorgan Chase & Co and HSBC Holdings Plc were hit with two lawsuits on Wednesday by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits.

The banks, among the world's largest, were accused of manipulating the market for COMEX silver futures and options contracts from the first half of 2008 by amassing huge short positions in silver futures contracts that are designed to profit when prices fall.
"Defendants reaped hundreds of millions of dollars, if not billions of dollars in profits" from the conspiracy, one of the complaints said.
The respective plaintiffs, Brian Beatty and Peter Laskaris, each said they traded COMEX silver futures and options and contracts, and lost money because of the alleged manipulation.
Beatty lives in Connecticut and Laskaris in New York, court records showed. The lawsuits seek class-action status, damages that may be tripled and other remedies. The defendant banks are major participants in the silver market.
JPMorgan declined to comment. An HSBC spokeswoman had no immediate comment.
The lawsuits were filed one day after the Commodity Futures Trading Commission proposed regulations to give it greater power to thwart traders who try to manipulate prices.

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http://www.reuters.com/article/idUSTRE69Q5HQ20101027

Act Now, CFTC Is Urged

By Susan Pulliam & Carolyn Cui

A Commodity Futures Trading Commission regulator is putting pressure on the agency to take action in a high-profile, two-year-old investigation of the silver market.

 
At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices. Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn't publicly disclose trader names.
CFTC Chairman Gary Gensler declined to comment on the silver investigation or Mr. Chilton's comments.

The call to action on the silver investigation comes as the CFTC faces increasing pressure because of its expanded role overseeing derivatives trading under the new financial-overhaul law. For years, lawmakers have criticized the agency for failing to aggressively police the commodities markets. 

http://online.wsj.com/article/SB10001424052702303341904575576203310056046.html

Silver Subject to Price Manipulation, Chilton Says

By Asjylyn Loder and Pham-Duy Nguyen - Oct 26, 2010 6:17 PM GMT 
As an investigation of the silver market by the top U.S. commodity regulator entered a third year, a member of the Commodity Futures Trading Commission said today there have been “repeated attempts” to influence prices. 

“There have been fraudulent efforts to persuade and deviously control that price,” said Commissioner Bart Chilton at a hearing today in Washington, alleging there have been violations of the Commodity Exchange Act. “Any such violation of the law in this regard should be prosecuted,” he said.
The five-member commission began investigating allegations of price manipulation in the silver futures market in September 2008. The CFTC said in a report that year that it had received “numerous letters, e-mails and phone calls” during the last 20 to 25 years alleging prices were being manipulated downward.
The CFTC proposed today new rules against manipulation and disruptive trading practices. Proving manipulation has challenged courts and lawmakers since the early attempts to regulate U.S. commodity markets in the 1920s.
“I don’t believe there is any long-term conspiracy to control prices,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “Manipulation can occur in small doses for very short periods of time. Adding regulation may not do the trick of correcting the problems simply because the players are smarter than the regulators and they’ll find another way to game the system.”
Silver’s Gain
Silver, used to create the first telegraph messages, has almost doubled gold’s gain this year, beating global equities, Treasuries and most industrial metals. Silver holdings through exchange-traded products surged this year. The metal is used in jewelry and industrial applications such as solar panels.

http://www.bloomberg.com/news/2010-10-26/silver-market-faced-fraudulent-efforts-to-control-price-chilton-says.html

Speculators polish up the price of silver

By Jack Farchy in London
Published: October 20 2010 17:37 | Last updated: October 20 2010 17:37

“Almost anything is better than paper money ... any fool can run a printing press.”
These are not the words of a modern-day gold bug, but attributed to Nelson Bunker Hunt, the billionaire oil baron who went long on silver in the 1970s. So long, in fact, that he and his brother cornered the market, were sanctioned by the regulator for market manipulation and went bankrupt in the process.

After their move, the price of silver hit a peak of $50 an ounce in 1980 before dropping to $10 the following year.
In the past month silver has bounced back to prices not seen since the Hunt brothers’ day. No single investor is cornering the market but, just as in the 1970s, the price is being driven by surging speculative demand as investors sweep up supplies of the grey precious metal whose primary use is industrial.
Investors in silver, also known as “poor man’s gold”, are persuaded by many of the same arguments that have driven the gold price higher: the prospect of a global “currency war” in which central banks race to devalue their currencies to support domestic growth and the belief that a second round of emergency monetary easing by the Federal Reserve could eventually lead to a sharp jump in inflation.
Gold has captured the headlines, ticking off one new record high after another, but volatility in bullion is near a five-year low, which for some investors makes it a less exciting prospect. Returns on silver, they say, could be greater.
Indeed, there are symptoms of spreading silver fever. Sales of silver coins are set to hit a record high this year, while investors have snapped up more than 1,500 tonnes of silver through exchange-traded funds (ETFs) in the past two months alone. That is more than 5 per cent of total annual silver supplies.
Michael Kramer, president at Manfra, Tordella & Brookes, a large US coin dealership, says: “Silver coins are doing very well.”
David Madge, director of bullion sales at the Royal Canadian Mint, says it has already sold in excess of 30 per cent more of its popular silver Maple Leaf coin than last year’s record 10m ounces. The US Mint has sold 27.5m ounces of silver American Eagles so far this year – already within reach of last year’s record 28.8m ounces with the busy Christmas period still to come.

http://www.ft.com/cms/s/0/25b81f4e-dc65-11df-a0b9-00144feabdc0.html

Momentum to propel silver price to new levels.

JOHANNESBURG - 
Author: David Levenstein
Posted:  Thursday , 14 Oct 2010

In 1980, the price of silver exploded upwards and traded above $50 an ounce. I recall this very clearly because I was trading silver through the London Metals Exchange (LME). In those days, the contract offered by the LME was 10,000 ounces, and the price was quoted in pounds, shillings and pence! While it takes more than a few words to explain why the prices went parabolic in 1980, suffice to mention that many investors had no idea what was going on or how they could participate in the silver explosion. I mention this, because the scenario we see with silver now reminds me of what we saw 30 years ago.  I do not mean that the driving forces behind the prices now are the same as those in 1980. Absolutely not; but, once again many investors have no idea about silver, what is going on in the market and how they can participate.
Silver is an amazing metal as it is both a monetary as well as an industrial precious metal. And, the demand for silver in industrial applications is extremely price inelastic.  Despite the fact that there is a large open short position which is held by the 4 or less large commercials trading via Comex, silver is benefiting from both general optimism on industrial production in emerging markets, and the investor interest in safe-haven assets like gold. Barclays Capital recently reported that the holdings of global silver exchange traded products it tracks has topped 14,000 metric tons for the first time. "Indeed, inflows in October have already hit 311 (metric tons), surpassing total inflows for the whole of August and almost half of September's 702 (metric tons)," Barclays says.
In 1980 individuals in South Africa were not allowed to hold offshore funds, and they were prohibited from owning any bullion. Now, even that these draconian laws have been ammended, the number of investors in South Africa and probably worldwide who own any silver is minuscule. Yet, silver has been one of the best performing assets over the last few years, and I believe that it will continue to out-perform most other asset classes over the next 5 years.
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Unlike gold, platinum and palladium, silver still remains well below its all-time high in spite of a developing shortage of supply. One of the reasons for this is been the alleged price manipulation by large traders such as the bullion banks that have sold massive amounts of silver on the futures markets to keep prices down. Currently, the open short position held by these banks is equivalent to approximately the annual global mining supply of silver.

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Now US regulators have been urged to reveal the results of a two-year-long investigation into silver and gold price manipulation allegations. Recently, Bart Chilton, a commissioner at the US Commodities Futures Trading Commission (CFTC) which is investigating the claims, said: ‘I think the public deserves some answers in the very near future.' He also added. "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."

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October 2, 2010 - An Unexpected Boost for Silver

By PiercePoints by Dave Forest

I wrote last week about Asia’s love for platinum. This week, it’s looking like there’s a new “hot item” in the East.
Silver.
Open interest in silver on the Tokyo Commodity Exchange has been on a tear. Since last Friday, outstanding contracts have jumped 20%.

It would be tempting to chalk the rising interest up to general enthusiasm about precious metals. After all, prices for gold, silver and the PGMs have all been rising of late.
But it appears that silver is something special in Japan. At the same time as silver contracts are being bought up, open interest in TOCOM gold has remained relatively flat.

The patterns on the two charts are divergent. Gold open interest in Japan spiked in July and has declined considerably since. Silver, by contrast, has been steadily rising for the last six months.
Of course, silver can be a tricky metal to pin down in terms of source of demand. With both industrial and investment applications, buying can be driven either by commercial users or individuals.
It appears in this case that individual buying is responsible. Most of the rise in open interest the last few weeks has come from “non-commercial customers”, suggesting the buyers are individual investors looking for a “store of value” spot to stash their money.
The rise is striking, and certainly helping the silver market. We’ll see if it continues.
Here’s to “poor man’s gold”,

http://www.thedailycommodities.com/2010/10/02/an-unexpected-boost-for-silver/

03 Oct 2010 - Investors see silver lining in economic gloom

By Garry White
Published: 7:00PM BST 03 Oct 2010

Silver prices have risen 31pc in 2010 to a 30-year high, outperforming gold, equities and most base metals. On Tuesday, the gold-silver ratio dropped below 60 for the first time in 11 months.

The gold-silver ratio is simply the number of ounces of silver it takes to buy one ounce of gold. The silver price is currently $22.11 and the gold price is $1,317, so the silver ratio now stands at 59.6.

The ratio varies wildly. In 1970, it was about 20 and it peaked at just under 100 in 1991. The average is around about 40 – and that is the key to any silver bull's argument. Historically, it appears that silver is undervalued in relation to gold, they argue.
In 2010, the ratio has been as high as 72, recorded in February, and is now just below 60. Many believe it could have further to fall.
The reasons for gold's outperformance are well documented – inflationary fears, currency woes and safe-haven demand – but does the declining ratio towards its average mean that silver is going to continue with its charge forward?

[continued]

http://www.telegraph.co.uk/finance/markets/8039595/Investors-see-silver-lining-in-economic-gloom.html