Although I don't follow the crusaders at Le Metropole and the GATA on a daily basis, I am nonetheless versed in the basic conspiratorial speculation: since demand for silver regularly beats supply, the artificially suppressed price of silver is - at any moment - going to explode higher.

No disagreement here, except for the 'at any moment' angle. To be sure, ever since the Hunt brothers failed to corner the market the observer has come to realize that ending the 'market manipulation' at COMEX is not easy to do. Rather, when the evil shorts - which concert to hold down the price of silver to make unscrupulous profits - become fearful of a price rise they simply inform their buddies at COMEX and the CFTC to change the rules. Case in point, when silver failed to obey the commercially dictated laws of gravity and go back below $6 an ounce in early 2004 COMEX raised margin requirements on silver by 33% (a tactic, historically, that has weakened the metal).

But alas, silver did not crumble following the COMEX margin hike. Rather, since the February 19 hike silver has zoomed ahead to 17-year highs (hit last Friday). Beginning to feel the heat the commercial shorts - which hold a massive 95,630 short contracts versus 10,230 long contracts - are undoubtedly calling for a helping hand. Yet the regulators have been slow in reacting. Some say COMEX is trembling because Spitzer is investigating them, while others speculate that the commercials are simply waiting for the right time to pound the price of silver lower. Incidentally, most investors don't care about the price of silver and are happy to own stocks and praise Greenspan.

Silver Manipulation

Before dismissing the crusaders as crackpots, it is worth studying the silver market more closely. As stated, and as has been repeated for some time from people such as Theodore Butler, despite the fact that demand regularly outstrips supply silver has (until recently) remained in entrenched bear market. Curiously, no other commodity has ever remained in a supply deficit for as long as silver (more than a decade) without prices firming. Suffice it to say, the seemingly bullish supply/demand fundamentals contrasted to the metals slumping price is the first, and most obvious reason why some believe that the price of silver is being manipulated.

The second manipulation consideration deals with the make-up of open interest in the silver market (at least the open interest that the public is privy to). Related to concern number one - or that there has been a suspicious disconnect between the paper trading price of silver and the fundamentals - this theory reasons that those parties who have profited during silver's bear market must be the ones doing the manipulating.

On this second point is where the conspiratorial mind comes into focus.

Are the Charts Telling Us Something?

For a quick example of how the commercials operate in markets take a look at Wheat. In Wheat sometimes the commercials are sporting a net long position, and other times a net short position.

Depending on the market, shifts in commercial interest can either move rapidly or slowly. For example, Corn is usually only influenced by only a handful of reports through out the year (the ups and downs in commercial interest move slowly), while heating oil is usually influenced by weekly news items (the ups and downs in commercial interest move more rapidly). Commercial interest gyrations aside, notice also the recurring theme: sometimes the commercials are short, and sometimes they long.

Lastly, consider gold. Whereas speculation swirls around the possibility that silver is manipulated, it is basically understood that such manipulation has (perhaps only in the past?) taken place in the gold market. Greenspan did little to reflect this speculation when he suggested that central banks stand ready to lease gold in increasing quantities should the price rise in 1998 (how does Mr. Greenspan know what central bank will do if gold rises?). Moreover, the open interest situation in gold and/or the hedging activities of companies like Barrick - which are suspicious yet not factually suggestive of manipulation - have formed a base of evidence to suggest that an illegal 'gold carry trade' exists, or did exist.

Regardless of innuendo, with the exception of unusual spikes in short interest commercial interest in gold is not unlike most other commodities: sometimes the commercials are short and sometimes they are long:

With the recurring theme well displayed - commercials sometimes short or long

Why is it that the commercials are always betting on a declining price of silver? Why is it that commercial net short interest regularly rises dramatically when the price of silver begins to rally? Is this because the commercials aim to manipulate the price of silver lower?

Look at it this way, for as far back as the statistics go the commercials have never been bullish on silver. Commercial investment tactics for silver:

• The US dollar is weakening - short silver!
• The silver supply deficit is widening - short silver!
• Buffett is buying silver - short silver!
• Gold is rallying and projected to head higher (as was the case in mid-late 2003) - silver is a super aggressive sell!

*Is this what the commercials are thinking? (the statistics would suggest so).

Suffice it to say, the logic doesn't make sense. Rather, the speculation that the commercials are controlling the price of silver by timely swamping the market with sell orders does. That these commercial short sales are not readily backed by actual silver is why the conspiratorial mind thinks that a mammoth squeeze could happen 'at any moment'.

The Plot Thickens

While it is prudent to own gold/silver to hedge against the US dollar's decline, inflation, terrorism, etc. (even the shorts have been unable to hold prices down since 2001), it is dangerous to make any investment on the assumption that you will profit when the market stops being rigged. In Japan falling stock prices meant direct government purchases of stocks, in the US a secretive group of plunge protectors buy baskets of stocks during heavy sell offs, and globally central banks aim to suppress the price of gold. This just in: most markets are 'rigged', and through out history not many have succeeded when challenging the manipulators. The Hunt brothers, which could be argued as being 'manipulators' themselves, failed miserably when they tried to corner silver back in late 1970s.

However, before dismissing the possibility of a massive squeeze as the silver shorts scramble to buy an amount of metal that doesn't exist, it is nonetheless interesting to speculate. To be sure, the commercial short position on silver is larger than the readily available supply of silver, COMEX couldn't slam prices lower with a margin hike earlier in 2004, and the price of silver held up well following its sell off after last weeks stronger than expected jobs report (which helped support the US dollar). Quite frankly, while the regular assumption is that the price of silver follows the price of gold, the opposite seems true today. Could this be because speculators have united to form a Hunt like attack against the evil silver shorts?

Conclusion

Keep in mind that the regulators - if indeed they are acting in tandem with the manipulators - are ruthless. Yesterday COMEX raised (again) the margin requirements on silver, and a spike in silver lease rates to begin this week has suddenly vanished. It would appear that certain parties were ready to lease silver in increasing quantities even though the price of silver has risen dramatically.

In short, although the payoff is potentially huge, it is not prudent to bet against the commercials. Quite frankly, the commercials - which are currently adding to a short position that is 55.3% higher than their average short position since 1986 (nearly a record) - are capable of crushing silver prices lower the second speculators flinch. Granted, no one knows exactly when this will take place, and silver could go considerably higher before it does (speculative long interest is only at 23% of the average speculative long interest position since 1986). Nevertheless, with wild, unpredictable swings in the price of silver likely going forward, selling some of your silver holdings now seems prudent. After all, investing in unpredictability is not wise.

What if the proverbial 'jig is up'? Although I have my doubts that the jig will ever really be up, if the manipulation is exposed look for panicked buying in silver and plenty of defaults.