Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is Silver Wheaton Corp. (USA) (SLW) Being Manipulated?

Page 1 of 2

4 Silver Miners That Pay a DividendAfter a recent article I wrote about the potential of a silver bubble, I got a question about the behavior of JPMorgan Chase & Co. (NYSE:JPM) with regard to the silver market, specifically the allegation that the bank was actively involved in manipulating the silver market through a sizable short position. The basis of the question seemed to be a request to bring forth the issue and address how silver was trading as a result of JPMorgan’s activity and within the context of the global economy in general.

As of last December, the last major complaint against the bank was dismissed in a federal court, as well as by the Commodity Futures Trading Commission. That doesn’t mean that no wrongdoing occurred, but it does suggest that insufficient evidence exists to take the matter forward.

In terms of the overall economy, an uptick in the overall strength of the global economy creates competing forces that drive silver. The defensive nature of precious metals means that general economic prosperity is bearish. On the other hand, the industrial uses for silver are such that economic activity can also be bullish.

The recent case
On Dec. 21, the case of 44 plaintiffs against JPMorgan was turned town in the U.S. District Court for the Southern District of New York. The class action suit alleged that over the course of several years, the bank had acted to manipulate silver prices at various times, primarily through a 24% to 32% control over all short positions. Many of the positions were inherited from Bear Stearns, but the plaintiffs alleged that silver prices had fallen on specific dates in 2007, 2008, and 2009 as a result of bank activity within the position.

To prove a prima facie case of manipulation, there are four specific elements:

  • The defendant’s ability to manipulate prices.
  • Intent.
  • The presence of an “artificial” price, as in the existence of manipulation.
  • A direct link showing the defendant was the or a cause of the manipulation.

In the absence of all four elements of the crime, no case for manipulation can succeed. The two hardest elements to prove are intent and the existence of an artificial price. The very nature of markets is such that we often see “unusual” prices without an immediate ability to explain them. Anyone who remembers the flash crash can attest to the fact that prices became unusual very quickly long before anyone was able to explain why. Even with the magnitude of the investigation that ensued, finding an artificial reason was very difficult.

Page 1 of 2
Loading Comments...