When silver breaks $18.50…it will then take out $50 and hit Eric Sprott’s number of $100-plus because since the last time it hit $50 they’ve gone through all that physical supply…this time they won’t be able to go to the physical supply well . – Bill Murphy on the Shadow of Truth

A “commercial signal failure” occurs in commodities futures trading when the open interest in futures contracts exceeds the amount of the underlying commodity that is available to deliver into those contracts should enough entities that are long decide to demand delivery per the terms of the contract.  It is a rare event because the futures open interest in most commodities rarely exceeds more than 10-20% of the amount of the underlying available.

Except in the gold and silver markets, when the open interest in any other commodity wanders beyond that 120% level the Commodities Futures Trading Commission puts a halt to the entities which are responsible for what has been determined to be “attempted market manipulation.”  This has occurred in the past in the energy markets.

To be sure, allowing open interest of futures contracts which exceeds the underlying availability of the commodity enables a higher degree of liquidity in the futures market. However, currently on the Comex the ratio of futures open interest to available gold for delivery is 174:1 – this is for the “registered,” or gold designated available for delivery.  In the silver market the ratio is 29:1.  Given those absurd ratios, it’s safe to assume the role of gold and silver futures trading is to enable the Fed and the U.S. Treasury, through their bullion bank emissaries (primarily JP Morgan, Scotia and HSBC) to use Comex futures as a tool for manipulating the market.

The Shadow of Truth hosted GATA/LeMetropole Cafe’s Bill “Midas” Murphy  to discuss some recent events which have led Bill to conclude the ability of the bullion banks to manipulate the precious metals has likely reached its end-game:  “eastern hemisphere demand for physical gold and silver is overwhelming the paper manipulators.”