On September 25, 2013, the CFTC formally closed its five-year investigation into allegations of manipulation of the silver market with an atypical public announcement of that fact. Unfortunately, this leaves the public at large, and the investing public in particular, in an unenviable position.
The silver market has been suspected of being corrupt for a long time. Few who were old enough to have money to invest can forget the colossal attempt of the Hunt brothers to corner the silver market in the 1970's. More recently, Commissioner Bart Chilton stated categorically, at a meeting on October 26, 2010 to consider new rules on Anti-Manipulation and Disruptive Trading Practices, that the silver market -- which had been under investigation for two years at that point -- was being manipulated.
Now the CFTC announces that, despite spending 7000 Enforcement Division staff-hours looking at everything it could think of, it cannot find sufficient evidence to conclude that the market is being manipulated.
This poses the critical question, then, of what is happening to the silver market. This is, of course, not necessarily within the Commission's mandate, so perhaps we should not fault them for not providing some answers or at least working hypotheses. But the high-level alternatives are mighty unappealing. Either the market is being manipulated and the regulators can't figure out how, or, the market is not being manipulated but, for unknown reasons, is behaving in what well-placed experts believe is an irrational way. Neither of these options provide anyone -- but those in privity with the manipulators, if there are such people -- any comfort concerning how to hedge or speculate in the silver market.
