Thursday, August 15, 2013

Why Is Silver Manipulation So Absurd?

Outsider Club
In an age where everything is being manipulated, it defies belief that somehow silver prices aren't being abused for illicit gains. In fact, there is plenty of evidence that silver manipulation is indeed occurring.
Take JPMorgan: It inherited a massive amount of silver shorts priced between $20 and $21 when it took over Bear Stearns in 2008. Combined with HSBC, the two mega-banks covered 85% of all silver shorts.
That’s a solid case for manipulation—because the short position was so massive compared to physical silver trading and long positions. What's worse, the US Treasury created the situation.
If the free market resolved the situation, silver would have more than doubled as the short position was covered and evaporated.
The massive position was maintained for years because it wasn't easy to wind down. Any large-scale attempts to unwind would be countered by other big traders and result in a loss. JPMorgan didn't have to, though; it simply needed to rig the system to turn a buck—and it did.
The author describes how JPMorgan and HSBC traders use after-hours high frequency trading to crush prices; in short, massive volumes of sell orders are placed and canceled in fractions of a second. The lower sell prices still appear in market data for anyone that cannot handle trading by the millisecond, leading to panic selling by other (much slower) traders.
The high frequency trading system then snaps up the positions for profit. After all, they never sold anything to begin with; they simply maintained short positions and canceled sales to buy at discounts.
“With the gross amounts of manipulation we've seen across every sector of finance, I cannot believe how silver price fixing has dodged every bullet and has still not gained widespread acceptance,” writes the author.
“Virtually every commodity, anything with an interest rate, as well as every type of financial instrument is dominated by a select few massive positions that move in tandem. Silver has some of the most lopsided, large positions in history… It is beyond crazy to think mega banks would make silver the sole exception to the rule.”
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