HomeOpinionWitch-Hunt Fails in Silver Futures Trading; CFTC

Witch-Hunt Fails in Silver Futures Trading; CFTC

by Guillermo Miguel Perez-Santalla

I have to admit, it amazes me how easily the government spends our money.

In 2008 the CFTC received a series of complaints about the silver market. According to their release today the most widely asserted complaint was that because silver product prices such as coins and bullion were higher that the price of silver futures should have also experienced an increase. The other complaint was that large shorts in the silver market were responsible for lower future prices.

cftcBoth these complaints, if handled by a person experienced in the marketplace, would have been dismissed summarily. Instead we have our government agencies expending 7000 enforcement staff hours according to their document today to ascertain whether there was or was not market manipulation. This represents at a rate of $60 an hour, taking into account wages and benefits, and this is pure conjecture, probably lower than the actual would represent about $420,000. This is a lot of money.

If these complaints had been addressed by a professional from the precious metals industry it would have saved the government a lot of headache and money. The number I propose before does not even account for the expenses that were caused to the businesses in the industry to be subjected to their interrogation.

Complaint number one: coin prices were up silver should have been up. – This is just ludicrous. And this was the bulk of the complaints? Silver coin and bar prices rose higher than the price of silver for two reasons. Demand for the product was high and supply of the physical product was low. Manufacturing needed to come up to speed to meet the surprise demand. In this instance, people paid high premiums to have immediate delivery. The silver was available for production but bottlenecks in actual production take time to resolve. Once product became available in the market the premiums disappeared and normal market conditions for these products persisted. This has absolutely no correlation to the price of silver.

silver_coins_4Complaint number two: large shorts in the silver market were responsible for lower futures prices. – In this day and age with immediate reporting with computer technology this would be made apparent. Attempts such as those by the Hunt brothers in the late 70s early 80s to corner the silver market in a reverse fashion would easily become apparent. The fact that shorts drive the market lower is a normal market condition. The argument here was that some big firm or conspiracy of firms shorted the market to profit from the move. This is not tenable and should of been thrown out immediately. I recall that during this witch-hunt J.P. Morgan was being held accountable for the drop in silver prices. The reason they looked for a scapegoat was because of the perception of physical shortage of silver created by the lack of “product”, not the lack of fine silver, had many believing that the price of silver would rise. They were wrong.

The truth is there was no shortage of silver. There was plenty of supply of fine silver to manufacturing plants. And finally there was no correlation between the perceived tightness in product to that of the fundamentals of fine silver supply from primary and secondary sources. In fact because of high prices at that time silver from secondary sources was higher and more abundant than usual.

This investigation concerning silver was a mockery of the marketplace. It was a sideshow created by the marketers who often try to manipulate public sentiment to support their cases for their products. Should not the government have retired experts from different industries available to them to answer these claims?  I believe this would help alleviate some of the more frivolous complaints quicker.

Finally, the CFTC, though meaning well, has squandered our money and hurt our economy in a small way. But just like the CFTC the Dodd-Frank act will also do the same but in a much grander scale. This will cause pain to our economy that was never imagined. Witch-hunts typically hurt the innocent and it already has begun.

About Miguel Perez-Santalla

santalla thumb Gold Took Off When Lehman Melted DownMiguel Perez-Santalla, Vice President of BullionVault in New York, has more than 30 years’ experience in precious metals industry. Previously he was Vice President of marketing for the multinational precious metals concern Heraeus in New York. Miguel has been recognized by his peers as an expert on precious metals topics. He frequently presents at the International Precious Metals Institute and other venues. He is host of  New York Markets Live, a weekly Internet radio show that examines all aspects of the precious metals market.

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  1. This commentator has no credibility, he was with Hereaus which is still a Silver Users Association member. The SUA has copiously lied about silver since 1947. The CFTC has had at least 5 Commissioners address the SUA over the years (documented) bowing and scraping before these perma-shorts, who seize up like a kid with a peanut allergy if silver has a 10 cent uptick. Guillermo eres un mentiroso sin alma siempre en rodillas enfrente de Senor Rothschild y sus compinches quienes tienen inversion en BullionVault; nos prefieren creer que el precio de la plata esta bien, pero no somos mentecatos. $10,000 for a dual list of The Pilgrims for 2013 subject to joint verification by myself and Joel Van Der Reijden, deliver all the names in both branches starting with “H” if the “H” names confirm, deal done for rest of list, Coin Week can hold the funds once the “H” names are confirmed, we are highly acquainted with the numerous “markers” to look for like operators in the LBMA system. But it’s not as if this flunky is a member nor can he access a list, but the offer stands. Coin Week it may be a strain to allow this post, but consult your conscience! Douglas Dillon was on The Pilgrims executive committee and took us off silver coins as Treasury Secretary in 1965, his undersecretary Roosa was also a Pilgrims member, those details appear in earlier Who’s Who editions.

  2. Read the CFTC statement carefully. It doesn’t state what they found or did not find. It talks about how they investigated for manipulation, how much time they spent on the investigation, some methods of investigation, but nowhere does it say what the evidence showed. All it could conclude was that based on the existing laws and the evidence, it was decided not to bring any charges against anyone. What if there were laws on the books that allowed a certain entity to interfere in the markets? If that were the case, the CFTC would be unable to bring charges against that entity even if it found evidence of manipulation. In fact, the 1934 Gold Act, which established the ESF gives the government such authority.

    • I did read it and also the second source you mention (GATA). I feel you didn’t read my linked item that appeared at several sites, documenting that since October 1998, several CFTC commissioners have committed glaring public malfeasance by addressing the Silver Users Association, demolishing any semblance of impartiality the CFTC should have projected. Are you cognizant of the matter that just because some source you rely on has consistently declined to reference my work (since 2001), that does not guarantee they made the right decision? The Silver Users Association has referenced my work (January 2006 Washington Report) but not Mr. Powell’s. In September 2009 at http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf they posted proof of foreign central banks gold swap dealings with the FED. However, two and a half years before that announcement, I posted court acceptable proof of gold swap arrangements by the FED with other CB’s http://nosilvernationalization.org/69.pdf In fact, the head of the NY FED even publicly admitted this on April 22, 1963, at the Economic Club of New York. It’s time the metals community gave my research, all free access, a hearing, rather than ignoring it because GATA refuses to mention it since May 2009 when Mr. Powell slammed me (after I boosted his group 49 times in research presentations before that!!) As for the 1934 GRA, it is dealt with in my 312 page item on the Roosevelt metals nationalization of 1933-1934 at
      Additionally, it is the duty of the courts to nullify unconstitutional legislation. Furthermore, when the federal government fails its duties, the states are supposed to start taking remedial measures! Immoral legislation allowing secretive dealings does not confer morality on any such actions. That’s clear in that the CFTC report said nothing about the GRA!

  3. I agree with Mr Savoie 1,000,000 %. Guillermo eres un maldicha puta por los Rothschild y su compadres sangiuente. Hay una escasez.

    Guilermo tu maldicho mentiro sin alma. SE levante de tu rodillas y cierre a tu boca!!

    CFTC is well meaning. You lying swine. What bull crap.

    Bart Chilton is from Delaware as is Dupont. Massive silver consumer. His grandaddy was a big thing over there.

    Asqueroso mentiro Guillermo.


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