In the 1980s, the Hunt brothers were convicted of manipulating the silver market. Now, in 2010, two independent, but related, law suits claim JP Morgan Chase and HSBC have been (and are) manipulating the current silver market.
Several different articles provide interesting insights into the silver market, in general, and the law suits in particular.
In February 2000, Mr. Theodore Butler, a noted gold and silver analyst, wrote to the Chairman of the New York Mercantile Exchange about his concerns for the illegalities existing on and the potential in the silver market.
His original commentary can be found here: The Silver Short Scam written and submitted on February 14, 2000.
The reply and his rebuttal to the reply can be found here: The Silver Short Scam Part IIwritten and submitted on February 21 and 29, 2000 respectively.
Fast forward almost ten years to January 11, 2010. Mr. Butler comments again on the problems inherent in the silver market in this article: Investment Rarities: Are “Short Contracts” Manipulating the Price of Silver? In the article, he discusses the problems JP Morgan Chase inherited when they absorbed the Bear Stearns assets and liabilities in early 2008.
A similar article in January 2010, Is ‘short contracts’ depressing silver prices?, continued the discussion of the JP Morgan Chase short positions in the silver markets.
In August, September and October, more and more people in the investment markets, particularly silver, began to notice JP Morgan Chase’s position in silver and the potential for market manipulation.
However, large market positions present tremendous risk as well. Take a look at this commentary: Silver: The House Always Wins, Until Now. The state of the economy and the increased investment education could present some costly problems to the large market holders of short positions in silver.
But, in addition to the natural punishment by the market, two different law suits present problems for the large silver market holders: JP Morgan Chase and HSBC. On October 27 – just last week – Reuters presented this story, JPMorgan, HSBC sued for alleged silver conspiracy.
As a follow-up, Reuters added this commentary: Analysis: Silver case hard to prove, despite Hunt Bros.
Additional commentary about the silver market speculates: Will Silver Top $30 By The End Of November?
The market is certainly volatile with silver’s market statistics and graphs diverging from its precious metal cousins, gold, platinum and palladium.
Many have thought for a long time that silver was undervalued. Others considered silver was priced unfairly less than gold since silver has also been a monetary standard in the past.
But, perhaps the real issue comes into play when the lack of physical product causes problems on the market. One of the above articles states, “Industrial demand for silver has been outstripping mining supply for the past 20 years, driving the above ground supply to historically low levels, according to the commodities research firm CPM Group.”
With the industrial interests and the dramatically increased investment interests in silver, the next few weeks could prove entertaining as we see how high the silver prices go.