A five-year investigation into alleged manipulation of silver prices has been dropped with no charges being filed, report Frank Tang and Douwe Miedema for Reuters. After 7,000 staff hours, the Commodity Futures Trading Commission (CFTC) decided that there was no evidence of wrongdoing.

CFTC

CFTC on the silver market investigation

“Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets,” the CFTC said.

Complaints of price fixing are probably more common than most people realize, and the CFTC conducts dozens of investigations every year with most of them concluding that the allegations were baseless. But this investigation into silver price fixing has been higher profile than most.

Gold and silver price manipulation

First, the CFTC made the case public in 2008, going against normal protocol, because of critics (some who sound like conspiracy theorists) who believe that a consortium of actors, including the U.S. government is manipulating gold and silver markets. One prominent example is the Gold Anti-Trust Action Committee (GATA), a website espousing the virtues of owning gold and silver while prominently advertising gold sellers. A cursory look through their materials shows a number of basic factual errors.

But the investigation caught the attention of more mainstream investors in 2011 when silver prices suddenly doubled and then fell back by 30 percent five days later. Large banks have acknowledged that they have strong enough positions in the markets to manipulate prices, but they say that even if such maneuvers were legal it would be against their interests. Fees for facilitating trades is a source of high quality revenue, while market manipulations that undermine confidence and depress trade volumes would actually lose them money.

CFTC supervising metal market

“The CFTC’s supervision of the monetary metals markets is likely trumped by the authorization given by federal law to the U.S. Treasury Department to rig all markets, and even to do it surreptitiously,” GATA Secretary Chris Powell wrote on the organization’s website.

Complainants who have spent the last decade alleging market manipulations are unlikely to be swayed by the CFTC’s decision to drop the investigation, but for everyone else it should bolster confidence that the silver market is sound.