The events of this last week should clearly demonstrate that investigation or not, there will be no regulatory intervention to discourage the scumbags that have been manipulating the silver futures markets. Sorry folks, I know we all want to see some heads roll here but the players are too connected and the entire system is too unstable to survive a major investment bank getting discredited for monumental fraud. It is not going to happen.

Now that does not mean I do not see silver breaking out. I think manipulation, even one that persists for many years, can only create even greater instability in the trading that will ultimately be resolved by fundamentals. For example, by keeping silver prices too low and driving some silver juniors out of business, there are fewer ongoing silver projects today that can supply the demand for physical silver tomorrow. Eventually the price for silver must rise to reflect that.

The trouble right now is that silver is driven by spec forces and not real consumption. Most traders could care less if enough physical bullion is on hand because they close out positions and monetize profits. Sooner or later a delivery default is inevitable. Then the game stops for good. You simply cannot have paper futures leveraged 100 to 1 for real silver, anymore than a bank that goes bust can reopen its doors the next day and pretend that all is well.

My guess is that all silver futures trading will be halted and enforced settlement of contracts in cash will be the end result. We saw something similar to this on a smaller scale with nickel about 3 years ago. The shorts were let off the hook and the longs were screwed out of a legitimate squeeze. There never was a fundamental supply shortfall for nickel so we did not the price spiral thereafter. For silver, we are sure to see a hefty premium tacked on to physical bullion and paper futures shunned once the scam breaks down. THAT is what we can look for in the months or years ahead.

I think the concept that the regulators are unaware of ongoing fraud is laughable, and therefore the idea they would choose to step in and end it now is equally unlikely. People have been instructed to look the other way. Now they have been instructed to pretend to investigate. Nothing will change until the scam collapses on its own.

cheers!

mike