The U.S. Commodity Futures Trading Commission's (CFTC)Division of Market Oversight announced this week that it has no new evidence ofmanipulation in the silver futures market from 2005-2007.

The Division of Market Oversight (DMO) examined recentsilver market price movement in relations to price movements of other metals;the relationship between the price of NYMEX silver futures and spot prices; andthe relationship between the positions held by large short silver futurestrades and silver futures prices.

The CFTC report also revealed that NYMEX silver futureprices tend to closely track the price of physical silver. However, the DMOasserted there is no observable relationship between short-futures-traderconcentration levels and silver prices.

DMO also found silver cash and futures prices have risendramatically between 2005 and 2007, with silver outperforming the gold,platinum and palladium markets, suggesting that silver future prices are notdepressed relative to other metals prices.

Their analysis also reached several other conclusionsincluding:

·        Concentration levels for the top fourshort futures traders in the silver futures market are comparable to thoseobserved in the gold and copper futures markets, and generally are lower thanlevels seen in the platinum and palladium futures markets.

·        The compositions of the four top shortfutures traders, in terms of net positions, changes over time. These tradersare diverse, and their futures positions are driven by an even more diversegroup of customers.

·        There is a slightly positive relationshipbetween the total net position of the large short futures traders and silverprices; this suggests that larger short futures positions are associated withhigher, not lower prices.

CFTC explained that advocates of the short-sidemanipulation argument contend that silver futures prices have been manipulated forclose to 25 years. What these advocates fail to indicate, however, is whereprices should be, except to argue that prices should be higher than they havebeen currently or in the recent past.

With respect to the claims of silver commentators thatprices are being suppressed, it should be noted that these commentators havenever articulated a credible explanation as to why, for more than 25 years,buyers have not entered the market to purchase silver (at the supposedlydepressed prices), thereby driving up prices to a level that these commentatorsbelieve is reasonable. In this regard, no barrier to entry has been identifiedthat would prevent individuals or firms from buying cash silver or enteringinto long silver futures positions. One answer of course, is that, in fact, themarket is behaving rationally that both buyers and sellers, individually and inaggregate, have been willing to freely transact silver at prevailing prices,according to the report.

Another issue that has drawn significant attention from silvercommentators is the level of concentration among short traders in the silverfutures market. However, the DMO said its analysis found that the compositionof market participants among the top four net traders is not static, albeitcertain traders do appear in the top four significantly more often than others.Meanwhile, the DMO asserted that the top 10 traders are not monolithic andrepresent a wide diversity of business interests with diverse customer bases.

Meanwhile, the report noted that silver commentators fearthat the silver futures market is vulnerable to a major disruption should thefour largest shorts either default on their obligations or be forced toliquidate these positions. However, DMO asserted that neither of thesescenarios are likely to occur.

The DMO concluded that the level of concentration of shortsilver traders does not appear to be unusually high nor does it exhibit anyusual patterns that would suggest manipulation or illegal activity.