Price manipulation has been a big deal in the silver market for a long time.
This goes back to the late 1970s and early 1980s when the Hunt brothers supposedly bought a massive amount of silver — about 35 million ounces worth over US$1 billion.
They went all-in buying physical silver and silver futures and even took delivery on the futures contracts instead of settling for cash.
As the Hunt brothers were busy accumulating silver, the price of silver bullion soared from $11 an ounce in September 1979 to a whopping $49.45 per ounce by January 1980.
But the party didn't last long.
On a fateful day in March 1980, the brothers missed a margin call, and the silver price came crashing back down to $11.
It's still up for debate whether the Hunt brothers were manipulating the market or if they were just playing a dangerous game themselves, but their impact on the market has never been forgotten.
Fast-forward to 2021 when the silver market manipulation discussion was reignited thanks to social media.
Inspired by Reddit's WallStreetBets and using the hashtag #SilverSqueeze, traders banded together and started buying physical silver and silver ETFs. Their goal was to squeeze the big banks that had significant short positions in silver.
And guess what? Silver prices shot up to an eight-year high, with an impressive 11% gain in just one day.
Of course, not everyone was on board with this silver-buying frenzy. Most analysts thought it was impractical or downright risky. But the die-hard silver bugs, who have long accused big banks and governments of manipulating silver, loved every moment of it.
The silver market is no stranger to these conflicting views, and it's an ongoing saga.
So what's the big idea behind silver manipulation?
Well, according to some folks, a group of large banks, the Federal Reserve, and U.S. Treasury manipulate silver prices through COMEX futures contracts.
The idea is that these banks keep a disproportionately large short position in the silver futures market, which allows them to keep the silver price down, even when the market fundamentals are bullish.
Why would this group want to keep silver prices down?
Well, that’s where the theory really breaks down. There’s no great reason for banks, the Fed, and the Treasury as a group to actively put a lot of effort into manipulating the price of silver. Some might argue this group manipulates silver for economic stability and/or inflation control. But the truth of the matter is there are way more effective means of economic stability and inflation control other than silver manipulation.
Now, don’t get confused.
There have been multiple cases over the past 30 years where groups of traders working at large institutional banks have been involved with manipulating the price of both gold and silver.
These individuals or groups are often doing what’s called “spoofing.”
Spoofing basically involves placing large orders for future contracts with no intention of executing them. This creates an artificial impression of demand and influences prices.
This practice can mislead other market participants and algorithmic trading systems, leading to price movements that do not reflect genuine market conditions. By engaging in silver spoofing, traders can manipulate silver prices in their favor, allowing them to profit from price fluctuations or execute other trading strategies.
And traders from banks including JPMorgan Chase, Deutsche Bank, HSBC, Barclays, Bank of America, Merrill Lynch, and Citigroup have been involved.
However, those were not (ostensibly) sanctioned actions by those banks. They were actions of individual traders breaking the law for profit.
Nevertheless, the battle between believers in silver manipulation and skeptics continues to rage on. Some think a cabal of banks and government bodies are actively suppressing silver prices, while others dismiss it as a wild conspiracy theory.
