In Ted Butler's Archive


Almost thirty years ago, I stumbled upon the COMEX silver manipulation because I happened to have a background in futures trading and could see that futures trading was dictating the price of silver. Over the years, the silver (and gold) manipulation became known. Despite that growing awareness, it is now clear that the same manipulative process now infects all the COMEX/NYMEX markets.

It is hard to imagine, in a free market economy, anything as harmful as having speculators set the price of commodities through futures trading. Take crude oil, for example, the most important commodity of all. The move to $80 is largely the result of more than 150,000 net NYMEX contracts sold over the past few months by traders in the managed money category (hedge funds). That’s the equivalent of 150 million barrels of oil. If, as I contend, this was the primary impetus for a $15 drop in the price of crude oil, then think what that means.

It means that traders with no interest in crude oil other than to make a technical bet caused the price to drop. Such a move could come to threaten the emergence of the U.S. as a large crude producer because fracking is much more expensive than conventional oil production. Do we really want technical funds selling unlimited quantities of crude oil futures and putting actual oil production at risk? That the CME and the CFTC are presiding over this as if nothing’s wrong is beyond shameful. Forget jail, these crooked regulators should be taken out back and beaten with a stick for allowing this to continue.

But the other important point is that while the technical funds are selling in all these commodities with a reckless abandon, the commercials (big banks) are buying with just as much abandon. You want to bet on the commercials to prevail in the end, particularly in silver. As sickening as the price declines have been, the commercials have bought the whole way down. Declining prices are the only way commercials can buy.

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