Gold Daily and Silver Weekly Charts - More Confusion and Concerns at the Comex

Light trading today despite all the overnight excitement.

Last night The Financial Times ran an online story that was their front page lead today suggesting that the CFTC was going to simply drop their four year investigation of manipulation in the silver market.

It is of course possible they would do this, but it seemed rather heavy-handed and clumsy to just drop a four year study one month before its expected release, especially since it is judged to be somewhat controversial. And it involves a futures market that has been rocked by scandal after scandal over the past two years.

Today we find out that the FT may have gotten their information wrong which is certainly a faux pas for a major news media outlet that generally would not run something like that without a dual confirmation of the facts, especially when it involves key market information.

At the end of the day, in the longer term, I am not sure that any of this matters. I think the market is heading towards a default in silver unless there is some sort of action or settlement imposed by the government and the exchange.

The metals manipulation has been as bad or even worse than LIBOR, and at some point rude reality is going to intrude given the stubbornly physical nature of bullion. At least that is what history suggests will happen after a long period of price manipulation.

But let's see what happens.

Still, this sort of nonsensical uncertainty and lack of transparency suggests that something is very wrong behind the scenes, and The Major Players and Very Serious People are trying to figure out what to do about it.

And of course, there is the impediment of the credibility trap for the government and the regulators to consider. Especially if He-Who-Must-Not-Be-Allowed-To-Fail has his tit irretrievably caught in the wringer, as they used to say, on the short side of a rising market where covering might not be 'practical.'

I hear the Brits are fit to be tied about the hypocrisy, especially after the public brow-beating they have taken over Barclays and LIBOR. And now the Yanks have the temerity to interfere with the attempts to clean their own house because of the potential collateral damage to Wall Street.

Read what Glenn Greenwald has to say about the modern rule of law with liberty and justice for some, and you will get the picture:

"You can often, and I would say more often than not, in leading opinion-making elite circles, find an expressed renouncement or repudiation of that principle...All of these acts entail very aggressive and explicit arguments that the most powerful political and financial elites in our society should not be, and are not, subject to the rule of law because it is too disruptive, it is too divisive, it is more important that we should look forward, that we find ways to avoid repeating the problem...the rule of law is not that important of a value any longer...

The law is no respecter of persons, but the law is also a respecter of reality, meaning if it is too disruptive or divisive that it is actually in our common good, not the elite criminals, but in our common good, to exempt the most powerful from the consequences of their criminal acts, and that has become the template used in each of these instances."

And for any who think that the problems are insurmountable, and that nothing can be done, here is a fine example of how wrong they can be. Each generation must take up its struggle with the principalities and powers, and dark forces in high places, especially those in their own hardened hearts.

SP 500 and NDX Futures Daily Charts - Technical Trade on Light Volume

Today's US equity markets were trading on light volumes largerly driven by professionals.

I think the late sell off in the SP futures was a fairly clear sign that momentum traders dumped their positions into the close, preferring not to hold them overnight.

It is really all about Europe at this point, and what the central banks may do in order to provide additional liquidity to the financial system via official debt channels.

Risky market.  Unless you are willing to swim with the sharks it is best to stay out of the water.

Curiouser and Curiouser: Bart Chilton Informs the Press About the 'Erroneous Report' on Silver

"A society becomes totalitarian when its structure becomes flagrantly artificial: that is, when its ruling class has lost its function but succeeds in clinging to power by force or fraud."

George Orwell

I am hearing from people who say they have received brief email replies from CFTC Commissioner Bart Chilton. 

Apparently if there is a move afoot to can the silver investigation without presenting any findings after four years, he has not gotten the memo.

He has informed the press about 'the erroneous story' according to emails I have seen from people who have heard from him on the matter.

If this was a front page article on the Financial Times one would hope they double confirmed it, and the sources were good. That makes this even more puzzling.

So let's see what happens. As I said in my lead sentence from last night, this could have been a 'trial balloon' to gauge the reaction and blowback if they did ditch the investigation, not wanting to expose the findings, or expose a coverup to later instances of perjury.

This leak to the FT *could* just be a 'trial balloon' by Mr. Gensler and his crew to see if they can get away with it. But that seems more like the plot of a novel.

This could be one of the best examples of the credibility trap in action. The government regulators can say nothing because of the shadow government's long term complicity.

Mr. Gensler was the assistant to Robert Rubin and Larry Summers in the 1990's and is a Goldman alumnus, where he was the right hand to Jon Corzine. It could be that Bart as a dedicated civil servant is not on the A-team.

Or this could just be the usual shenanigans that the Street likes to play with the press.

All of this highlights the problems of the credibility trap and the lack of transparency in the US markets, made especially sensitive by a shocking series of financial scandals that are repeatedly distorted and often covered up.

Addendum:

Mr. Chilton apparently made this statement to the editor of the SilverDoctors site.

"The Financial Times report related to silver is not only premature, but inaccurate in several respects.

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 desire in anything we do.

I continue to believe, consistent with my previous statements to which you referred, and based upon information from the public, that there have been devious efforts related to moving the price of silver. Incidentally, I also believe there have been silver and gold market anomalies outside of the silver investigate window that have raised, and continue to raise, market concerns.

Perhaps there will be more coverage on this matter soon."

Now I am beginning to wonder if during this 'four year investigation' that the actual window of investigation into the market was relatively short, and that there was some effort made for the market participants to behave themselves during that window.

I have seen that sort of thing happen before. The investigators, who were industry consultants, exposed the pararmeters of the study window to their market cronies. The CFTC can then say that the formal investigation was 'inconclusive' and kick the can down the road.

One hears different and sometimes disturbing things about the US regulators. I even heard that the US Treasury is discouraging a UK initiative to beef up their Serious Fraud Office, and turn it into an Economic Crimes Agency with a more effective focus and resources.

Apparently the key metric in determing investigations into economic fraud these days is political. And this is the essence of the Glenn Greenwald piece I ran last night, which is that the rule of law has been replaced by the rule of expediency, where might makes right, or at least grants special exemptions from the law.

CFTC Said to "Drop" Four Year Investigation Into Silver Just Before Promised Release

CFTC To Investing Public: 'Drop Dead.'

This leak to the FT *could* just be a 'trial balloon' by Mr. Gensler and his crew to see if they can get away with it. But that seems more like the plot of a novel.

This could be one of the best examples of the credibility trap in action. The government regulators can say nothing because of their government's long complicity.

If the CFTC in fact does 'drop' the investigation without presenting findings, one could consider that a slap in the face of the American public which on the whole asked for the investigation to be done in the first place, by the regulators who purportedly are hired and paid to serve their interests.

Given the recent admissions about widespread manipulation in LIBOR, the timing of this outcome to the CFTC invesigation could hardly be more arrogant and high-handed, and designed to put the investing public in their places.  It will certainly not inspire any confidence in the integrity of the markets and their regulation.

It would probably be unwise for the investing public to accept this outcome without presenting some consequences.

I suggest that a mass cancelling of futures trading accounts and the withdrawal of all funds deposited there might be a step in the right direction.

Given the serial criminality that has been exhibited in the US futures markets, that action might be long overdue on the basis of common sense.

Financial Times
Four-year silver probe set to be dropped
By Jack Farchy in London and Gregory Meyer in New York
August 5, 2012 10:00 pm

A four-year investigation into the possible manipulation of the the silver market looks increasingly likely to be dropped after US regulators failed to find enough evidence to support a legal case, according to three people familiar with the situation.

The Commodity Futures Trading Commission first announced that it was investigating “complaints of misconduct in the silver market” in September 2008, following a barrage of allegations of manipulation from a group of precious metals investors.

In 2010, Bart Chilton, a CFTC commissioner, said that he believed there had been “fraudulent efforts” to “deviously control” the silver price.

But after taking advice from two external consultancies, the first of which found irregularities on certain trading dates that it believed deserved more analysis, CFTC staff do not have sufficient evidence to bring a case, according to the people familiar with the situation...

Read the rest here.