Rumors of price manipulation have long circulated through the precious metals markets. An avid community of researchers spends a great deal of time digging through price charts and Commitment of Traders (COT) reports looking for clues.
A recent court case seems to have validated their suspicions.
A former trader at the megabank JPMorgan has pleaded guilty to charges of "spoofing" or manipulating precious metals prices. The illicit activity allegedly occurred over a six-year period from 2009–2015.
Conspicuously, this is the same time frame that gold and silver prices exhibited considerable volatility, climbing to all-time highs in 2011 and then sliding over the following years.
It's also telling that the manipulation carried on for six years without any corrective action. 2015 was around the time when traders at other major banks began facing convictions for manipulating other financial instruments, such as the Libor (a key interbank lending rate).
Coverage of the JPMorgan trader story by CNBC suggested that the admission of guilt may "boost" the claim that the bank itself is responsible for this trader's behavior.
Whether or not the guilty trader's actions become the responsibility of his employer, this news does to some extent prove the "conspiracy theorists" correct.
Moreover, this is not the first time that JPMorgan has been implicated in similar forms of price manipulation.
If you're wondering, "Why would they do that?"—the answer is obviously "profit." Yet the profit motive goes deeper than any one trader.
JPMorgan has also famously accumulated one of the largest stockpiles of silver in history (at least on paper), which in itself gives the megabank outsized influence over prices (even if it doesn't rise to the level of overt manipulation). As it stands, the bank holds a stockpile of over 150 million troy ounces of silver.
Again, that's simply on paper (i.e. futures contracts), but nonetheless shows that JPMorgan is no stranger to how silver markets and their price discovery works.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.
Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.