Silver Price Manipulation
Silver market participants can be downright passionate when it comes to the topic of silver price manipulation. What are the key events and theories?
From the Hunt brothers to social media’s “silver squeeze,” silver price manipulation is a longstanding and much-discussed feature of the silver market.
Silver price manipulation dates back to 1979 to 1980, when oil baron brothers William and Nelson Hunt reportedly bought upwards of 35 million ounces of silver worth at least US$1 billion.
The Hunt brothers were buying both physical silver and silver futures, and were taking physical delivery on futures contracts instead of settling for cash. Their actions ultimately sent the white metal’s price soaring to nearly US$50, which is still its highest price to date.
However, their scheme ultimately ended in disaster: On March 27, 1980, they missed a margin call, and the silver price plunged to US$11 per ounce in an event forever known as “Silver Thursday.”
Were the Hunt brothers manipulating the market, or were they facing off against it themselves? The question remains, and it’s getting new life today — following historic trades that targeted hedge funds shorting GameStop (NYSE:GME), retail traders emboldened by Reddit’s WallStreetBets forum and the hashtag #SilverSqueeze piled into physical silver and silver exchange-traded funds (ETFs) with the hope of putting pressure on big banks with silver short positions.
WallStreetBets members have since disputed who was actually snapping up silver, but wherever the activity came from, it pushed silver above US$30 to its highest level in eight years. The 11 percent price gain was the metal’s biggest one day percentage gain since 2008, as per the Financial Times.
More cautious silver market analysts view these recent price-moving activities as impractical or even downright dangerous. However, longtime silver bugs who have for years pointed to alleged silver manipulation on the part of big banks and governments have embraced the situation.
These dichotomous sentiments are a part of an ongoing saga in the silver market. Here the Investing News Network (INN) takes a deep dive into silver manipulation, from the past to the present.
Silver manipulation theory
For at least four decades now, gold and silver analysts and investor market participants have debated the validity of allegations concerning precious metals price manipulation through COMEX futures contracts by a cartel that supposedly includes a group of large banks, most notably JPMorgan (NYSE:JPM), as well as the US Treasury and US Federal Reserve.
By maintaining an overly large short position in the silver futures market, so the theory goes, these banks have at times been able to suppress the price of the white metal in the face of bullish fundamentals. The belief is that the silver price will not rise significantly until these players allow it to do so.
