Hi Mr. Chilton,

I hope this email finds you well.

At the New York Close on September 20, 2011, Gold was priced at $1,804.80 and Silver at $39.74. The price ratio relationship between the two precious metals was

45.42 to 1. In essence, Gold was being valued at 45 times the price of Silver.

At 8:53 A.M. EST September 23, 2011, Gold had fallen to $1,687.60 and Silver had fallen to $32.70. Measured from the NY Close on September on September 20,2011, the percentage decline in the two precious metals is as follows:

Gold - 6.49% decline
Silver - 17.71% decline

Hence, between the NY Close on September 20, 2011 and 8:53 A.M. EST September 23, 2011, Silver declined 2.73 times the amount of Gold’s decline.

One could argue that the dollar amount of this price decline in Silver ($7.04 decline) would have been much more reasonable if the price ratio relationship between the two precious metals had been 16.64 to 1 at the close on September 20, 2011. I calculate the 16.64 amount by taking the 45.42 to 1 ratio and dividing the 45.42 by 2.73. (Recall, since the NY Close on September 20, 2011, silver has declined 2.73 times the amount of Gold’s decline.)

To clarify my point, I believe the $7.04 price decline in Silver would have been much more reasonable if Silver had closed at $108.46 on September 20, 2011. At a Silver price of $108.46, the price ratio relationship between the two precious metals would have been 16.64 to 1.

The fact that silver has declined 2.73 times the amount of Gold’s decline since the NY Close on September 20, 2011 is made even more difficult to comprehend when one considers the dramatic steps taken by the CME Group in late April through early May of 2011 in what the CME group represents was an effort to reduce the volatility related to Silver’s trading.

Please recall, on April 25, 2011, the CME group announced the first of 5 margin increases that would become effective between April 26, 2011 and May 9, 2011. CME Clearing President Kim Taylor has represented that they did so to adjust to volatility in the marketplace.

Mr. Chilton, the past several days provides strong evidence that the CME Group’s efforts to adjust to volatility were ineffective, as Silver’s percentage decline has been far greater than Gold’s. Futures Trading of commodities must have serious flaws if a precious metal with stable supply and demand fundamentals can fall 17.71% in value in less than 3 days.

The following questions must be answered. How is it possible that Silver has declined 2.73 times the amount of Gold’s decline between the NY Close on September 20, 2011 and 8:53 A.M. EST September 23, 2011? Did the CME group take the proper steps to adjust to volatility in the marketplace over the past few days, or does the CME group only take those types of steps when Silver is appreciating? Finally, following is a critical question that we have all been awaiting the answer to: Why did the CME group raise margins 5 times between April 26, 2011 and May 9, 2011 when Silver’s price appreciation had been very orderly?

Thanks you for you attention to these matters.