Putting Silver Price Rigging Into Perspective

As we continue to witness orchestrated take-downs in the paper price of silver, the real market rigging is taking place in another industry.  After the price of silver fell 5% in a twenty-four hour period of time, precious metals investors are once again concerned about the future outlook of the shiny metal.

If psychology is the key to market trading, the Fed and its member banks have done an excellent job destroying market sentiment in silver currently.  I say currently, because “ALL” fiat currencies and Ponzi schemes collapse.  There are no exceptions.

Controlling precious metal sentiment, controls the price rise of these two monetary metals.  Low gold and silver prices keep the public’s faith placed firmly in the regime of irredeemable currency — the U.S. Dollar.

If we take a look at the intraday silver chart, we can see a huge $1.00 swing from the high ($19.95) yesterday, to a low ($18.93) today:

Price Silver Move

Several of the well-known precious metal day traders such as Dan Norcini, don’t believe that gold and silver markets are rigged.  Norcini made this comment in his blog on the subject of precious metal manipulation by a top German regulator:

When the German authorities prove that Deutsche Bank was also DOWNWARDLY manipulating the price of all those commodities which make up the various commodity indices out there, then you will have a convert here. Until then, this has nothing to do with the price of gold unless of course you are willing to boldly proclaim that DB is the culprit behind the fall in the price of corn and wheat and sugar and coffee and gasoline, and on and on and on. Take a look at the GSCI, an index which I regularly post here to try to teach folks how to READ SENTIMENT in regards to the broader key markets – it has been steadily falling for some time now. Why would gold be moving higher if the general price of commodities has been moving lower over that same period , especially over the last year? Gold was moving lower because WEstern investors did not want to own it and tie up precious investment capital in a NON PERFORMING asset, not while there was so much money to made in Equities!

While I respect Dan Norcini as he was once associated with Jim Sinclair’s site for many years (no longer), I totally disagree with him on the theory of “Precious Investment Capital.”  Dan believes gold is a non-performing asset because there is “so much money to be made in equities.”

Dan may trade gold, but does he understand what the term “money” really means?  He states that investors can make a lot of money in equities.  I gather he meant to say, “fiat currency.”  Because there is a big difference between money and fiat currency.

If you don’t know the difference between money (gold-silver) and fiat currency (U.S. dollars and all the increasingly worthless paper currencies in the world), I suggest you watch the series, Hidden Secrets of Money at GoldSilver.com.  If you only have time for one of the five videos, then watch the first one for sure.

The problem with Dan Norcini’s paper market trading analysis is that it becomes meaningless the day the United States Government finally announces a banking holiday with a planned dollar devaluation.  At that point in time, all the successfully acquired digits in one’s trading account are subject to huge losses when the dollar is devalued say… 30-50% overnight.

Trading digits and making fiat currency gains are not a long-term viable market strategy.

Getting back to subject at hand… while silver enjoyed volatile 5% trading range, copper managed to move a boring 1.2%:

Copper Falls

This chart is only showing the price movement for copper today (Jan 30, 2014).  As we can see copper only fell $0.02 (0.6%) compared to silver’s decline of $0.53 (2.7%) for the trading day.  Copper fell a little more than $0.04 (1.2%) from its peak yesterday, while silver investors were lucky enough to enjoy a huge $1.00 swing (5%).

I gather the market felt that silver would suffer much worse than copper after the Fed announced an additional $10 billion taper.  I am being sarcastic here.  There is no way to figure out these markets today when they are totally rigged.

Where The Real Market Rigging Is Taking Place

While I believe there is manipulation occurring on the gold and silver paper exchanges, the real rigging is taking place in the Interest Rate Swap and Forex Markets.

If we look at the chart below, we can see that Interest Rate Contracts consist of 81% of the total notional amount held by U.S. Banks:

OCCs Q3 2013 Derivative Report

According the OCC – Office of the Comptroller of Currency Q3 2013 Report, 93% of the total notional value held by these top U.S. banks were in Interest Rate and Foreign Exchange Contracts.  The third largest piece of the pie were Credit Derivatives at 5.4%, followed by Equity Contracts at 0.9% and then commodities, which came in last at a measly 0.6%.

This next table provides detail on how these five asset classes are broken down (I say asset classes… but in all reality, the majority are liabilities):

OCCs Q3 2013 Derivative Report 2

The top U.S. Banks currently hold $195 trillion in Interest Rate Contracts and $28 trillion in Forex Contracts for a total of $223 trillion.  Contrast this to commodities, including gold and silver, which only amount to $1.2 trillion.

Not too long ago, gold was used as the major asset class in banks for balance of trade settlement.  However, today these banks spend all day long trading one worthless financial paper contract for another.  As the system becomes weaker, the notional value of these financial products inflate to insane levels.

Basically, Interest Rate Contracts control the overall market interest rate.  To get a better idea on how the Interest Rate Swap market works, please read my article, THE BIG QUESTION: Where is the Price of Silver Headed in 2014.

You will also notice that the Interest Rate Contracts and Swaps represent the majority of trading activity by the banks in Q3 2013.  The banks total notional value of their Interest Rate Contracts increased $7.1 trillion while the commodities/other category increased $13 billion.

Here we can see that the banks are controlling the market because their Interest Rate & Forex Contracts outweigh their commodity asset holdings (including gold and silver), by a factor of 163 to 1 ($195 trillion vs. $1.2 trillion).  This is where the real market rigging is taking place.

Precious metals investors need to understand that in order for this Grand Derivatives Ponzi Scheme to continue, the price of gold and silver have to be controlled to keep the masses from waking up.  To keep the public purchasing worthless 401k’s, IRA’s, bonds, most equities, pension plans, CD’s and etc, the OUT OF SIGHT, OUT OF MIND TACTIC is used by the Fed, U.S. Treasury and member banks.

When the price of gold and silver move up too high, this puts a kink in the fiat monetary authorities game plan.  The Fed and banks have no use for a public that is WELL INFORMED AND AWAKE.  As long as Americans continue to behave and purchase the crap the U.S. Treasury and banks dish out… everything is fine.

I would like to conclude this article by reminding the reader that investors lost $18 billion (estimated by court appointed trustee) in the Bernie Madoff Ponzi Scheme.  According to Wikipedia:

Madoff said he began the Ponzi scheme in the early 1990s. However, federal investigators believe the fraud began as early as the mid-1980s[17] and may have begun as far back as the 1970s.

Putting it into perspective…. Ponzi schemes can last a long time.  Investors who are acquiring paper wealth by trading digits in a fiat monetary system, time is not on your side.

I plan on releasing the U.S. & GLOBAL COLLAPSE REPORT in February.  The report will provide detailed information and data on what will be the biggest economic collapse in history.  In the past, mankind always had the ability to recover and rebuild after suffering from a World War or economic calamity.

Unfortunately, this time will be different…..

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19 Comments on "Putting Silver Price Rigging Into Perspective"

  1. Hey Steve,

    yup, insurance absent capital to pay off in the case of a problem = derivatives / swaps. Allows leverage beyond belief.

    PM’s are minnows in dollar amounts among whales…but if this is a finite planet and PM’s truly are running into very short supply…the minnow could suddenly turn into a monster…but this all seems too predictable for those short the metals to allow themselves to be caught in their own web of hyper-hypothetication. What are we missing which is neither getting anyone else bothered or what simple, tidy solution that people (non-shills) are believing will resolve this quickly approaching shortage?

    • Silver and Gold revaluation will resolve the shortage.

    • Chris,

      JP Morgan & the bullion banks who are on the short side are working in behalf of the Fed. Even if they get caught on the wrong side of the SHORT SQUEEZE FROM HELL, they will never have to pay up.

      Also, the problem is so bad in the U.S. banking system, it really doesn’t matter anymore. As Jim Willie states, the Banks are a CRIME SYNDICATE today.

      I would imagine those who are behind the scenes in the Banking Cartel are full aware of the situation and have their own stores of gold and silver when the CRAP HITS THE FAN.

      Just like the London Gold Pool that went BELLY-UP in 1968 when the U.S. wouldn’t fork out anymore gold.. this too will go BELLY-UP.

      steve

  2. Hi Steve, I think you got Dan wrong. He is a TRADER, making a living of the daily-weekly price swings. He knows well where the price will ULTIMATELY go in the long run. As for the short- and middle term price swings, he has generally be spot on with his analyses. As long as the current system stays intact, the paper shenanigans dictate the price, irrespective of what the fundamentals say, e.i. until something breaks. We’re not there yet, but it’s coming and time is nearly up, me thinks. As such, even the naked short attacks we’ve all seen over and over again are paper TRADES, someone wins (fiat) and someone loses (gets stopped out). Since we do NOT KNOW 100% who is behind these trades, it’s unclear whether this is active paper suppression or just “normal” trading. Dan (and others) argue that after the run Au and Ag had up to 2011, a major correction is actually healthy and needed to propel the market higher. My take, after listening to many people, is simple. The discussion about “manipulation” is not fruitful. Those that make the claim (even if they are likely right) have a hard time proving it (as Dan would say proving it’s directionally down only) and thus are brand-marked by the masses. As long as a critical mass does not take delivery of metal and rather continue that paper charade, the price finding mechanism remains what it currently is and we get more of what we’ve had. I’m quite sure, that if/when a overnight reset comes, Trader Dan will have more ounces than many stackers that are crying foul play. For now it is what it is, until reality kicks in. Thanks for your informative blog and great insightful work. chx

    • CHX,

      I actually agree with you on Trader Dan. I know he’s stacking as well. Again, the whole market is rigged via the Interest Rate Swap market. I look at the market as a huge Bernie Madoff scheme. The folks investing with Bernie could still drive around all day and brag that he was making them a lot of money… that is right up until the time the PONZI SCHEME collapsed.

      I don’t really care about proving manipulation. We are way beyond that now. I will get into more detail on this in my upcoming U.S. & GLOBAL COLLAPSE REPORT.

      steve

    • Well said. I like gold and silver but when the both the DOW and S&P Index can make someone twenty plus percent then there is a flood of money going that way. Same thing pushed gold up too high a little while back and the same swing will push the markets back down and metals back up a little, but not with gold knocking on 2,000 an ounce.

  3. Manipulation…with capital M.

    Oct 12, 12 – German Audit court sez audits of gold advisable (but court only in advisory role to Bundesbank…cannot enforce this)…Bundesbank sez no need…and CNBC runs following article.

    The Bundesbank is, of course, quite right in its opinion of the value of the examinations. In reality, it does not matter one bit whether the Federal Reserve Bank of New York actually has the German central bank’s gold or whether the gold is pure. As long as the Fed says it is there, it is as good as there for all practical purposes to which it might be put. It can be sold, leased out, used as collateral, employed to extinguish liabilities and counted as bank capital just the same whether it exists or not.

    The actual presence of the gold wouldn’t make a lick of difference unless, say, Germany’s central bank decided it wanted to start using the gold for some practical, non-monetary purpose like making watches.

    http://www.cnbc.com/id/49540593

    Oct 24, 12 – Buba requests 50 tons sent annually to Germany for 3 yrs for inspection plus “in negotiations” for full auditing rights

    Apparently, negotionations go nowhere…Fed explained that “in the interests of security and of the control process” no “viewings” are possible.

    Nov 3, 12 – Buba says fears over gold stored in Fed are “irrational”, “no doubts concerning credibility of the Fed”.

    Nov 18, 12 – Gold trading @ $1752, COMEX has 3.4 million oz deliverable

    Dec, 12 – Abe takes office in Japan, begins Yen depreciation

    Jan 1, 13 – GLD inventory @ 1350 tons

    Jan 16, 13 – Buba states gold redeploy, 300 tons from NY, 374 tons from Paris…both by 2020

    April 1, 13 – Gold trading @ $1581 and COMEX has 3 million oz deliverable

    May, 13 – Indian Gold imports hit record 162 tons for month of May…China imports 225 tons for May…Global mining supply 240 tons

    June, 13 – India adds 8% duty to imports and restrictions…plans to undercut 2012 import total of 845 tons

    August, 13 – India applies bans and restrictions on gold imports…imports cut to under 30 tons…India’s good buddy Pakistan bans gold imports to curb smuggling to India

    Dec 31, 13 – Japanese Yen/dollar depreciated from 80 to 107…near a 50% depreciation…Yen carry trade is 1:1 inverse of gold price

    Dec, 13 – US scrap (all non-mining output) exports collapse from 880 tons in ’08 to below 200 tons in ’13…Global scrap supply declines from 1775 tons to 1300

    Jan 1, 14 – China takes delivery through SGE of roughly 80% of all annual mining supply (up from less than half in ’12 and significantly lower in previous yrs).

    Jan, 14 – Fed begins $10 B taper…further $10 B taper announced

    Jan 31, 14 – Gold trading @ $1240 (-$500 decline or roughly 30%) and COMEX has 375 k oz deliverable (roughly a 90% decline in deliverable)

    Jan 31, 14 – Fed announces it returned 5 tons of gold to Germany in first of 7yrs…China took delivery through SGE of roughly 1,800 tons

    Jan 31, 14 – GLD inventory @ 792 tons (roughly 35% drawdown)

    Feb, 14 – COMEX likely greater delivery’s requested for Feb than current Deliverable gold quantity

    Feb, 14 – India considering repealing ban on gold imports as of March, political considerations around rampant inflation absent a hedge is not good politics

    2015 – Gold mining output predicted to decline due to lowered capex, exploration, continuing cost of production below all-in-costs of mining

    AND GOLD IS UNIVERSALLY EXPECTED TO CONTINUE DECLINING IN PRICE ON WEAK DEMAND

  4. I’m hoping for sub-$18 silver.Regardless,I’m buying as much as possible when it makes sense.

    • lastmanstanding | January 31, 2014 at 5:21 pm |

      Personally, I think that premium increases will occur to off set any drop in silver…regardless if it is sub $18 or even less. Over the last year or so, I have paid $22 an oz. whether it is 1, 5, 20, 100+ oz at a time from my local coin dealer.

      I prefer Sunshine rounds and any nice clean round that is US in identity. I am not going to pay $25 for an American Eagle when I can get a beautifully minted Idaho Sunshine round for $3 less.

      I could order on line and maybe save a bit, but I am not for a second, interested in waiting any amount of time to get my metal…I pay and I walk out the door with it. I realize that many do not have that option…I guess that I am very lucky.

      Today I got 10 shiny new Morgan dollar look-a-likes for $220 and walked out the door with them.

      IMO, we are finally/fast approaching the point that an online deal will be highly risky. Sending a large amount of hard earned fiat for metal that is a week, 2 or 10 away like the last time. But this time your funds will be gone and no metal coming back…ever…and all the while you could have been buying food, ammo, firearms, a wood stove…any tangible item for survival.

      Amen Scott…buying silver always makes sense.

      To Steve. You are the only one that understands the earth, metals, oil/fuel/energy availability “thing”.

      I believe that you will be the “lastmanstanding” when this all shakes out.

      • That’s all I meant.I couldn’t care less about what the price is,ever.Hell,smash it to $5 PLEASE.

        Or in the words of Jim Rogers in a recent interview to an MSM Keynesian fiat freak puppet-“You keep your paper dollars and I’ll keep my gold and we’ll see which one goes to zero.”

  5. I am sick to death of hearing about gold and silver manipulation. We already know is going on. if the SEC is going to continually ignore it, it’s going to continue no matter what. Sure eventually supply and demand will trump the manipulation, but can you outlive that to say “I told you so”? Probably not. There’s too many higher interests involved for it to end anytime in the near future. Focus on the ROEI, this case makes more sense than anything else I have read and fits in nicely with the supply and demand equation. We are already seeing ROEI in mining. Either in the form of closures or mine after active mine stating that they are switching to higher grade ore veins. Manipulation is always open to intense argument from believers and non-believers, but how can you ignore ROEI? You cant. Even if Silver does go back up to $50 an ounce, it’s still a bargain. Glad I was 100% in physical way before the price rise in 2008. Now I can profit off the paper side just as the banksters are doing. My view is, if they are willing to take my worthless paper for real metal, I have no problem giving it to them. Trading toilet paper for metals is a no brainer.

    • BrrrinAlaska,

      While you are correct that the “MANIPULATION STORY” is an old worn-out one indeed, I try to approach it in a different way. Also, we must remember, there are always NEW people to the precious metal industry. Maybe you understand the situation better than most, but I also write for the new-comers.

      Furthermore, the INTEREST RATE SWAP market is the major culprit that has distorted the value of pricing goods and services. The reason why I bring it up because it actually has to do with PEAK OIL & the FALLING EROI – Energy Returned on Invested.

      The Fed & Banking Cartel have been manufacturing Derivatives to offset the peaking of oil. Without global oil growth, the Fiat Monetary System collapses. Thus, the very reason why they have been adding Trillions of Dollars to the Interest Rate Swap Market.

      There are 3 Nails in the Coffin for the Fiat Banking Cartel:

      1) Global Peak Oil
      2) The Falling EROI
      3) Decline of Net Oil Exports

      One is bad enough, but all three are really causing serious stress for the Fiat Monetary Authorities. This is precisely why I discuss the “Manipulation.”

      Things are far worse in the Energy Markets than most realize. I will be discussing this in more detail in my first Paid Report ….. THE U.S. & GLOBAL COLLAPSE REPORT.

      steve

  6. Another possible shoe to drop could be B.R.I.C. convincing OPEC that the US’s Fiat currency shouldn’t be the world’s standard as it’s not backed. If the US ever loses the currency standard like the British Sterling, watch out.

  7. Norm Gibbons | February 2, 2014 at 7:32 am |

    Perversely looking forward to your US & Global Collapse Report. Just read recent article by Gail Tverberg, who believes collapse is imminent due to lack of financial funding. She doesn’t believe that a steady state economy is any longer an option.

    http://ourfiniteworld.com/2014/01/29/a-forecast-of-our-energy-future-why-common-solutions-dont-work/

  8. I posted a new article on Silver..

    Silver Bottom is In ?….. Silver Is Now Recorded as the Most Undervalued Asset Within the Last 15 years of data !! by Silver Sufferer

    http://silversufferer.com/?p=789

    Hope you enjoy…

  9. So my question would be should I continue to buy physical silver? I plan to continue unless price goes beyond a historic high, I will hold as much as I can afford for 30+ years.

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