CFTC’s 5-year silver market probe ends with a whimper

The recent announcement by the U.S. Commodities Futures Trading Commission that it had closed its five-year investigation of U.S. silver markets and decided not to file any charges was met with howls of protest by gold and silver bugs.

In a news release, the CFTC, which rarely issues comment on the outcome of its investigations, said, “Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets.”

In September 2008, the CFTC confirmed that it was investigating complaints of misconduct in the silver markets, specifically whether silver future contracts traded on the COMEX were being manipulated. “For example, the complaints pointed to differences between prices in the silver futures contracts and prices in other silver products, including retail silver products,” said the agency. “The complainants generally asserted that because the prices for retail silver products, such as coins and bullion, had increased, the price of silver futures contracts should have also experienced an increase.”

“By reference to publicly available information concerning large traders with short open positions in the silver futures contracts, the complaints also alleged that the large shorts in the silver market were responsible for lower future prices,” the CFTC said.

Utilizing more than 7,000 enforcement staff hours, the CFTC’s Division of Enforcement reviewed and analyzed position and transaction data, including physical, swaps, options, and futures trading data, as well as other documents and information, and interviewed witnesses. The investigation included an evaluation of silver market fundamentals and trading within and between cash, futures and over-the-counter markets.

“Separately, the Division of Market Oversight continued surveillance of the silver market contemporaneously to the Division of Enforcement’s Investigation” which included “a robust monitoring of traders’ positions and violations of the Commodity Exchange Act and Commission regulations including, but now limited to, price manipulation and other violations,” said the CFTC.

CFTC Commissioner Bart Chilton, who had championed the CFTC silver investigation, told Reuters that he was disappointed by the decision. “For me there has not been a more frustrating nor disappointing non-policy-related matter at the CFTC,” he said.

Earlier this month, Chilton had proclaimed that if the CFTC did not tell the truth about silver manipulation then he would.

GATA Secretary/Treasurer Chris Powell wrote, “GATA always has warned that the CFTC’s supervision of the monetary metals market is likely trumped by the authorization given by federal law to the U.S. Treasury Department to rig all markets, and even to do it surreptitiously.”

“The CFTC can’t stop market rigging when the U.S. government does it—it’s the law,” GATA proclaimed in a headline in an article on its website.

“In light of the provisions of the Gold Reserve Act, today’s abdication by the CFTC is completely consistent with monetary metals market manipulation as legal U.S. government policy,” Powell concluded.

CPM Group’s Erica Rannestad told Kitco News, “It’s really hard to prove manipulation. The silver market has multiple hubs, silver is graded globally, 24/7.”

U.S. silver guru David Morgan told Kitco that he was not surprised at all by the CFTC announcement.

No official comment yet from precious metals analyst Ted Butler, a darling of U.S. silver bugs, who has long fought to uncover silver manipulations.