By Jon Matonis, THE MONETARY FUTURE

“A billion dollars isn’t what it used to be.” –Bunker Hunt on the Sunday after Black Thursday when confronted with a significant payment demand from Engelhard.

If you want to know what happens when multiple long positions demandphysical delivery of a commodity all at once, you need look no further than the Hunt brothers silver saga of 1979-1980. They did nothing illegal, the Chicago Board of Trade (CBOT) and COMEX changed the rules in the middle of the game, the Commodity Futures Trading Commission (CFTC) implemented new regulations, and the Hunts were bankrupted, unjustly. All they really did was simply request the delivery of the physical metal for which they held valid, legal contracts. The shorts were unable to meet the delivery at any price because enough deliverable silver did not exist – a classic short squeeze and the panic was on.

This is their story. In conjunction with wealthy investment partners from Saudi Arabia, the Hunt brothers, Bunker and Herbert initially, amassed a legendary silver hoard that had supported itself with ever-increasing prices propelled along the way by their continued margin buying on the exchanges.

Beginning in 1973 and continuing into 1974, they slowly began purchasing silver futures contracts totaling 55 million oz and then took physical delivery of all the contracts. Since Bunker was concerned with impending inflation and the potential confiscation of precious metals following Nixon’s closing of the gold window, he arranged for transfer of the bullion to Switzerland. Larry LaBorde summed it up best:

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Daryl Montgomery submits:

The CFTC (Commodity Futures Trading Commission) will be holding hearings on trading in the precious and base metals on March 25th in its Washington, D.C. offices. Possible manipulation of the silver market is on the agenda. Critics have maintained for years now that a few large banks hold down silver prices by having large concentrations of short positions in the market – and this disadvantages the small trader.

The CFTC has investigated manipulation of the silver market by the big banks before, in 2004 and 2008. They found nothing. This should provide little comfort to investors, however. The SEC, one of the other major U.S. market regulatory bodies, investigated Bernie Madoff many times over more than a decade and also found nothing. Madoff eventually turned himself in when his $50 billion Ponzi scheme fell apart on its own accord. Madoff had never made any trades in his mega sized scam, so the SEC’s examination of his trading records couldn’t have been very thorough. Running a simulation of Madoff’s claimed trading strategy also would have revealed it didn’t work. To invest the money that Madoff held in his fund, it would have been necessary for him to hold more than 100% of some S&P futures contracts, an obvious impossibility. Moreover, a whistle blower detailed the Madoff scheme to the SEC years before it demise and large numbers of additional investors were bilked out of their life savings. Yet, the SEC still found nothing amiss. Investors should consider what the Madoff incident indicates about the quality of U.S. market regulation.

Silver futures trading is by no means an even playing field in the United States as is. Small traders can be paid in cash when their positions expire. Delivery of actual metal is guaranteed only for commercial users. This was particularly relevant in the fall of 2008, when the price of silver fell to around $9 an ounce on the futures market. The physical metal wasn’t available for anywhere near that price in the open market. Prices of bars and coins were much, much higher. The option of getting silver at the exceptionally low futures price was not open to the little guy however. The CFTC, whose motto is “Ensuring the Integrity of the Futures and Options Market,” sees nothing wrong with this.

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Gold rose $6.60 to $1108.30 in London before it fell to see a $0.55 loss at $1101.15 by late morning trade in New York, but it then rallied back higher in the last couple of hours of trade and ended with a gain of 0.37%. Silver dropped 7 cents to $16.93 in London and rose almost 1% to $17.142 by late morning in New York before it fell back off a bit into the close, but it still ended with a gain of 0.41%.

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Gold rose to see a gain of $11.54 at as high as $1119.24 in London before it fell back off for most of the rest of trade and ended near its late session low of $1098.15 with a loss of 0.54%. Silver climbed to $17.33 in London and dropped to $16.925 in New York before it bounced back higher in late trade, but it still ended with a loss of 0.82%.

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COT Silver Report – March 12, 2010

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11:10a ET Saturday, March 13, 2010

Dear Friend of GATA and Gold (and Silver):

Silver market analyst Ted Butler tells Eric King of King World News that while the commercial shorts in the silver futures market have increased, the likely JPMorgan Chase short position has not increased substantially. Butler also reports that that much metal just moved out of the silver exchange-traded fund, SLV, which he considers bullish, an indication of tightness in the silver market. Commercial traders are now long the euro and short the dollar, Butler says. Butler also continues to be encouraged by the chairman of the U.S. Commodity Futures Trading Commission, Gary Gensler, in regard to ridding the futures markets of excessive concentration and the resulting manipulation. The interview is about eight minutes long and you can find it at the King World News Internet site here:

http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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By Theodore Butler, GoldSeek

Recently, I was contacted by a reporter for the Financial Times of London. He was looking to write a story about the CFTC’s upcoming hearing on precious metals. I could tell in my conversations with him that he was skeptical about my claims of a downward manipulation in the price of silver. As a result, the story he wrote reflected his skepticism, which was rooted in how could such a manipulation exist for as long as I alleged and how could silver be manipulated if it doubled in price over the past five years?

I understand the reporter’s skepticism and recognize that it is prevalent among those who have not taken the time to study the circumstances in silver. It’s not unusual for people to hold strong opinions about issues they are not well-versed on. I discovered long ago that silver is such an issue.  Everyone knows that silver is a precious metal and they have some amount of familiarity with it. It is a human trait to then think they know all that needs to be known about it. Many are skeptical with the idea that silver could possibly be manipulated, even before they are presented with the facts. Their minds are already made up before the facts have even been presented. Furthermore, the fact that the allegations of manipulation are coming from someone “outside the establishment” convinces them that the idea of a manipulation is preposterous.

Today, I will attempt to convert the skepticism about silver, as widespread as it is, into something positive. Long-time readers know I was once a silver skeptic myself, and it was only a challenge by my friend and mentor, Israel Friedman, to investigate silver’s continuing consumption deficit that led to my study of silver. That’s what led me to discover that silver was manipulated in price.

The first issue among the skeptics is the length of the alleged silver manipulation, said by me to date back more than 25 years. How could such a manipulation last so long, in full view of the entire investment world and front-line regulators created to prevent such a manipulation? A quick answer is – are you kidding me? We have experienced, in the past few years, the uncovering of massive frauds and financial and regulatory failures in the form of Bernard Madoff, the failures of giant financial organizations like AIG, Bear Stearns and Lehman Brothers, and the manipulation and collapse of the housing market via uneconomic financing. None of these financial disasters were terminated by prudent regulatory intercession; all ended when the music stopped.  Next to those events, the silver manipulation is not out of place. The only question is whether the CFTC will do its job and end the silver manipulation or wait until the music stops and the physical silver shortage hits in earnest.

A more detailed answer to the question of the silver manipulation’s longevity lies in the nature of the manipulation, and revolves around excessive and concentrated short-selling on the COMEX. Let’s face it, the vast majority of people can’t even comprehend what a short sale is, no less what concentrated short-selling may be. It took me a full month of studying and contemplation when I first trained to be a commodity broker for Merrill Lynch 40 years ago, before I started to comprehend how you could sell something you didn’t own.  My point is that understanding the downward silver manipulation is not easy, nor does it come quickly. Most skeptics demand to be convinced immediately, yet their own skepticism and the complexity of the manipulation prevent immediate understanding.  It’s easier for them to remain unconvinced. Once again, what they object to is the idea of a silver manipulation, not the facts in question.

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Gold saw a gain of $2.29 at its session high of $1109.94 as this morning’s economic data was released before it quickly fell to see a loss of $7.10 at $1100.55 shortly afterwards, but it then climbed back higher for most of the rest of trade and ended near its earlier high with a gain of 0.005%. Silver dropped to see a loss of $0.16 at as low as $16.83 before it also climbed back higher and ended near its late session high of $17.153 with a gain of 0.88%.

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To know the hard-rock mining business is to love it. But you’ve got to learn it to know it. This business is so full of charlatans, characters, fortunes made and lost, splendid, big-hearted souls, death, murder and mayhem, and governmental and pressure group interests as to confuse an Einstein intelligence.

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Gold rose as much as $6.14 to $1127.94 in London before it fell to see a slight loss at $1118.85 by about 10AM EST in New York and next rose back to $1127.35 by a little after 11AM, but it then plummeted to as low as $1103.45 shortly after noon and ended with a loss of 1.26%. Silver saw a slight loss at $17.26 in Asia before it rose to see a gain of $0.30 at as high as $17.63 by late morning in New York, but it also fell back off into the close and ended with a loss of 1.96%.

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