For anybody who doesn't follow this stuff, the rumoured existence of these contracts supposedly proves, or at least supports, allegations of manipulation and supression of the silver price by JPM. On the other hand, the rumour may well be BS intended to misinform investors into mistiming their trades, incurring losses and losing faith in the narrative behind silver investment as a result.
No hard evidence has surfaced so far to back this specific manipulation claim and, despite whoever started the rumour supposedly having an intimate enough understanding of the situation to know the specific price and time conditions tied to these contracts, they don't seem know how many of these contracts JPM holds, nor who the other party to the contracts is/are.
Now, I've no doubt manipulation takes place in the markets; it's a big money game and when stakes are high, some people will do whatever it takes to get or maintain an advantage. Lots of those sorts of people work at investment banks, and bullion banks are closer to the bullion market than anyone, so I don't doubt it takes place, I'm just not someone who readily buys into a specific theory or claim without some tangible proof to back it up. One thing I can do though, is compare the performance of JPM stock with that of spot silver and see what story that tells.
Here's a comparison of the relative performance of the pair over summer. Remember silver had been hammered down from just under $50 on May 1st. The two horizontal dotted lines mark $33.30 and $36.60, both of which have proved to be recurring support and resistance levels for silver in the last few months.
As you can see, JPM (red line) started the summer in the mid $40s; around $10 higher than the recently steamrollered silver. However, it experienced a very steady decline and lost 35% between mid-June and mid-Sept. Meanwhile, silver pulled itself back up and was $10 above JPM by the end of August - basically they were going in opposite directions, had swapped places, and JPM was looking pretty weak in comparison to the steadily climbing metal.
Look at that huge $8 drop in silver from just under $40 to $31.5 on 22-23 Sept (marked by the vertical broken line). That is an abnormally huge move - not a natural market move by any means. Now, Federal Reserve chairman Ben Bernanke had put out his 'Operation Twist' statement on 21st Sept which disappointed the markets and caused selling off in lots of asset classes, but nothing as dramatically as silver.
So, why this huge move in silver at this time? Well, look at where JPM's stock price was when silver sat at the top of that waterfall - it had just fallen below $30 for the first time since the 2008 crash and was on shaky ground. Perhaps it really is just a coincidence and for some reason holders of silver were more sensitive to Bernanke's bad news than everybody else. Or maybe there is something to the rumour of JPM supressing silver's market price.
Look again at the downward move of the two lines on that graph. The red one is steady and natural, the grey one severe and unnatural; something caused by only two things - panic selling in a market crash, which this wasn't, or manipulation. If the rumours of the JPM $36 'derivatives bomb' are true then they would have the motive and the market selloffs on the back of Bernanke's statement would have provided the cover. And if that did happen, well, you would expect the charts to look pretty much like they actually do.
As can clearly be seen in this chart of Sept-Oct, the silver price has effectively been 'reset' to match JPM's stock price. Again, is this coincidence, or a sign of manipulation? You decide.
Regardless, it seems silver is up off the mat (again) and is climbing faster and pulling away from JPM. Will we see a continuation of the uptrend, or more sideways action for silver? How long before bank debt exposure to Europe and the general global economic car crash blows up and takes the banks along with it? Who knows, but my money is on silver outperforming JPM in the long run.
Charts based on data from COMEX and NYSE daily close price.
Current prices: Silver $33.86 / JPM $33.64
No comments:
Post a Comment