CSI: Comex. The Gold and Silver Massacre
As with most crime scenes, evidence can be difficult to uncover. First, you have to know where to look for the evidence. Then, how do you build a case if the only evidence you find is circumstantial? Well, your humble correspondent is willing to give it a try.
With deference to our legal department (CALawyer), it would seem that the first component of the investigation is the search for motive. Does JPM, et al (aka The Cartel aka The EE) have the motive to attack and slaughter the gold and silver markets?
- The total Cartel net short position in gold has risen from 160,000 contracts at year end 2011 to 229,000 contracts last week. This is an increase of 43% while gold had risen in price by nearly 15% over the same time period.
- The total Cartel net short position in silver has risen from 14,000 contracts at year end 2011 to 39,000 contracts last week. This is an increase of 178% while silver had risen in price by nearly 30% over the same time period.
- As of Tuesday evening, February 28, gold was threatening to overtake critical resistance at $1800 and, if successful, would surely accelerate its rapid ascent.
- As of Tuesday evening, February 28, silver had broken through critical resistance at $36 on heavy volume and was trading above $37. A move toward $40 was imminent.
Were there any witnesses to the crime? Even if it's heresay, enough corroborating, eyewitness testimony can turn a circumstantial case into a successful prosecution.
- Exhibit A - The information posted by Turdite "Goldmania3000". In it, GM3 lays out a series of detailed conversations he had with his broker and floor broker at the time of the crime yesterday: http://www.tfmetalsreport.com/comment/135841#comment-135841
- Exhibit B - The Prosecution received several emails yesterday similar to the one below. This particular one came from a Turdite who chose to remain nameless: "I was wondering if you have heard about the rumor going around that a group of ex jpm traders are trying to corner the silver market to crush JPM. Todays action is allegedly JPM fighting back. Not sure of the validity, I heard it from our broker who is usually a pretty reliable source concerning the PMs. Somebody told me they too heard it from another source. Just wondering if you know anything about this."
Lastly, the circumstantial, physical evidence. At the crime scene, did the perpetrators leave behind any clues? Like any villain, our criminals may try to cover their tracks but, sometimes, a complete cover-up is impossible.
- In gold yesterday, the total open interest fell by a massive 17,303 contracts. This drop was entirely due to the closing of positions in the April12 contract where the open interest declined by 17,991, from 270,183 to 252,192. The next delivery month, June12, saw its OI rise from 65,492 to 65,522.
- In silver yesterday, the total open interest fell by a tiny 1,039 contracts. A drop in the May12 OI from 65,443 to 64,280 making up the vast majority of the change.
Combining this evidence, the prosecution hereby summarizes it's case:
- In an attempt to crush gold and negatively impact silver, The Cartel (led by JPM) liquidated at least 10,000 April12 gold contracts yesterday. They did so in a hurried fashion, not concerned about efficient execution, in a blatant attempt to set off a cascading, "waterfall" selloff in gold. It worked, again, as gold fell nearly $100 at its worst.
- They were also successful in creating a huge, sympathetic selloff in silver. However, total open interest in silver only declined by 1000 contracts, even though price declined by over $2.
The Honorable and Decent Magistrate (Turd) declares his verdict:
The Gold and Silver Bullion Banking Cartels are hereby declared GUILTY of tampering and manipulating the precious metals markets with the malicious intent of falsely creating fear in investors and hoping that, through the creation of this fear, gold and silver will fall farther and The Cartels will be able to successfully extricate themselves from the substantial net short positions they have acquired by attempting to suppress and contain price rallies through the first two months of 2012.
All evil conspirators and co-conspirators shall be defrocked, flogged and humiliated in the public square. They shall then be sent to Van Diemen's Land where they shall spend the rest of their days wailing and grinding their teeth while being to forced to watch endless reruns of "Full House" and "Barney & Friends". This sentence must be carried out at once, without appeal, before The Evil Ones are able to amount a follow-up assault on their true target, silver. With open interest still near 115,000, The Honorable and Decent Magistrate fears that it is only a matter of time before The Convicted attempt another crime.
Se ordena, declara y decreta