A report Monday that the Commodities Futures Trading Commission (CFTC) would drop its four-year-old probe on silver price manipulation may have been premature.
According to The Financial Times, the CFTC was supposedly unable to find enough evidence to support the claims after reviewing 100,000 pages of documents and interviews. But Bloomberg News reported today (Wednesday) that CFTC Commissioner Bart Chilton said silver price manipulation did occur, and he's intent to find it.
"I continue to believe, consistent with my previous statements and information from the public, that there have been devious efforts related to moving the price of silver," Chilton wrote to Bloomberg. "There have also been silver and gold market anomalies outside of the silver investigate window that have raised, and continue to raise, market concerns."
A History of Silver Price Manipulation
The silver price manipulation case began in September 2008 when the CFTC received "complaints of misconduct in the silver market" by a group of investors. It subsequently launched an investigation.
Two years later, Chilton said "fraudulent efforts" to "deviously control" the silver price had been found.
He continued lobbying for the investigation and upon hearing the rumored news of its close, he said Monday, "The Financial Times report related to silver is not only premature, but inaccurate in several respects."
He added, "Whenever the CFTC does take an action or actions related to our silver investigation, I am hopeful that we will do so in a fulsome and transparent manner. That will certainly be my quest in anything we do."
Chilton said last month the investigation could be over as soon as September.
It will take all five of the CFTC commissioners to decide whether or not to close the investigation.
A CFTC spokesman said to The FT, "The investigation has not reached its conclusion."
JPMorgan (NYSE: JPM) and Silver Price Manipulation
One of the alleged guilty parties in silver price manipulation is none other than JPMorgan Chase & Co.
Silver market watchers for years now have accused JPMorgan of keeping silver prices low through massive short positions on the white metal. No proof of the trades has been found.
Some investors have filed a class-action lawsuit against the bank.
JPMorgan attorneys have asked for a dismissal, arguing that the plaintiffs "fail to identify a single trade" exemplifying manipulation, reported the Financial Times.
Other possible parties that could potentially be relieved at the closing of the case are yes, the Federal Reserve. Rumors have swirled for some time that it had played a role in manipulating both gold and silver prices in accordance with its low-interest rate policy.
Paul Craig Roberts, a former Assistant Secretary of the Treasury under President Reagan, said in a July 2012 interview with Matterhorn Asset Management, "I suspect that the Federal Reserve is manipulating the gold and silver markets in order to prevent its low interest rate policy from undermining the value of the U.S. dollar. It is easy to offset rising prices of bullion due to physical demand by selling shorts in the paper market."
What does all this mean for investors?
Silver market analyst Ted Butler spoke with Money Morning's Global Resources Specialist Peter Krauth in April to discuss silver price manipulation. Butler said the manipulation will be stopped - and investors will want to be holding some silver when that happens.
"The manipulation has caused silver to be priced much cheaper than it would be otherwise," said Butler. "That makes it a better buy. The silver manipulation also will end one day, as all manipulations throughout history have ended. Given the nature of these things, the price of silver will be much higher when the manipulation ends. Therefore, the manipulation is giving silver investors a double-barrelled bonanza. One, a cheap price to buy at than would otherwise be the case and, two, a much higher price to sell at once the manipulation is ended."
Silver is up nearly 1% this week to around $28 an ounce, and has gained nearly 3% over the past month.