Before this revamp, traders simply had to say how much demand/supply they had from clients at a certain price.

The price would adjust based on what traders reported, which left ample room for traders to report numbers that were false. That is, instead of giving numbers that reflected what their clients were saying, traders would report numbers that would move the fixing price in a way favorable to their own positions.

Again, not an activity that can result in the manipulation of metals prices over the long term (before it was revamped).

While the first two examples related to how silver prices could possibly be directly manipulated, this last example applies more to industrial metals like aluminium. The same thing could possibly be done in the silver markets, but if it has, or is being done, it isn’t at levels bad enough to capture widespread attention.

This method pertains to London Metal Exchange (LME) regulations, which allow for metal warehousing operations to release only a small percentage of their total inventory each day. This creates an immediate bottleneck in the supply chain, which in turn creates a short squeeze since purchasers of the metal cannot get enough metal out of the warehouses to meet their levels of demand.

This causes purchasers of the metal to bid up prices in order to secure enough for their own use. Other purchasers do the same, and it quickly descends into a free for all.

The only parties making out handsomely in this situation are the owner of the inventory who benefits from higher prices, and the owner of the warehouse who keeps earning rental revenues on renting space to owners of the inventory.

Now… what if the owner of the metal and the owner of the warehouse are the same person?

Therein lies the heart of the manipulation, but again, this method cannot be used to support Reddit’s allegations of manipulation, simply because it pushes prices upwards, not downwards!

As such, it is highly unlikely that silver prices are being manipulated in the way Redditors think they are; the size and scope of the market simply precludes it.

While manipulation is possible and has happened in the past, they are confined to being short term and small scale, affecting individual transactions on an intraday basis rather than a multi-year or decade (depending on who you ask) basis.

This also means that the overcrowding on the short side of the silver market due to manipulation does not exist… So what is there to squeeze?  

To be continued…