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Two commentaries by Jim Sinclair

Section: Daily Dispatches

9:09p ET Monday, February 9, 2004

Dear Friend of GATA and Gold:

Silver market analyst Ted Butler's latest commentary,
appended here, reports on indications of trouble for
the silver shorts and, more importantly, on the
request of the Commodity Futures Trading Commission
for comment from the public on the governance of
the commodities markets.

As Butler writes, this opportunity must be seized by
all of us, even as Butler once again has done all the
work. He shares below his letter to the CFTC urging
specific changes to stop the suppression of the silver
price, and all we have to do is write similar letters or
letters endorsing his appeal to the CFTC. Butler has
even provided the e-mail addresses to use.

You can write your own letter, calling attention to the
failure of the New York Commodities Exchange to
enforce reasonable position limits in silver futures
trading, or you can just copy Butler's letter and
preface it with a note indictating your endorsement
of his appeal.

The timing of the CFTC's request for public comment
suggests that the campaign inspired by Butler for
a review of the silver market already is having a
big impact. Let's see it through.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

A Special Invitation

By Theodore Butler

First, a quick update on the recent COTs, then a remarkable

For the week ended February 3 there was sizable liquidation
in COMEX gold, more than 29,000 contracts in the dealers'
net short position for the week, and more than 60,000
contracts from the top a few weeks ago. Over the past year
this magnitude of liquidation has led to sizable rallies.

In silver, we witnessed only relatively minor liquidation for
the week of 8,000 contracts in the dealers' net short
position, leaving then still net short almost 430 million
ounces, one of the largest figures on record.

Since this weekly report included the two days of sharp
decline, of 40 cents and 20 cents respectively, the
relatively small liquidation is telling. It means either that
there is more liquidation to come, or that the dealers may
be stuck.

I note, with interest, that my theory that the big short was
abandoning the short side and double-crossing the other
dealers was not proved wrong in this latest COT. The
concentration ratios for the past two weeks show an
increase of more than 10,000 contracts and a decline of
8,000 contracts in the total dealers net short position.
The four or fewer largest traders have a smaller net short
position, while the next four largest traders hold a larger
net short position. The pattern has been apparent for the
past five weeks. If my analysis is correct, this could be a
bombshell for the market.

Another bombshell could be the personal invitation just
extended to each and every participant in the silver market,
including you. On February 6 the Commodity Futures
Trading Commission (CFTC) issued a remarkable release
concerning the self-regulation of the commodity markets.
The complete statement can be found on the CFTC's
Internet site:

a href=

An article in that day's Wall Street Journal suggested that
insiders in the futures industry were surprised by the
statement. I know I was, and I'm no insider.

The gist of the statement indicates that the CFTC wants
more time to study the self-regulating structure of the
commodity exchanges and, most importantly, is soliciting
comments from the public to gauge the level of general
trust in the integrity of the commodities markets.

I'm not making this up -- the regulators are asking you
for your comments, complaints, and suggestions as to
how the markets are run.

Here are the last two sentences in the CFTC's release:

quot;Separately, the commission will solicit written comments
on the topic of SRO (self-regulation) governance from
members of the public. The commission will then decide
what steps should be taken, if any, after a thorough review
of all comments received.quot;

Please think about that for a moment. You have just been
handed a valuable gift on a silver platter -- pun intended.

I know that many of you have written to the CFTC, the
COMEX, and New York Attorney General Eliot Spitzer at
the urging of myself and others like GATA. This is great,
and I thank you. But this is the first time ever that the
CFTC has asked you to write in. Take my word for it --
that's really special. In fact, this is so special that I
think the CFTC feels pressured to ask for your input,
probably as a result from the letters sent by you already.

Whether you have written already or not, you MUST write
to the CFTC now. It is a matter of speaking up now or
forever holding your peace. Because the CFTC is
soliciting your opinion, it will become a matter of public
record, and you can expect to see the CFTC publish
each and every response it receives. Much more
importantly, your letter will have an impact, just as your
previous letters have likely already have had an impact.

There is no way that the CFTC will be able to ignore the
many comments I know the commission will receive, since
it is the commission itself that is asking for those
comments. The commission must act if it gets the
response I suspect it will.

There are not many instances over a lifetime where we are
presented with the opportunity of influencing something
important in the public arena. This is a rare opportunity,
presented only to those who have taken the time to
study the silver story, to make a difference. You must
stand up and be heard. Even if you only have doubts as
to whether silver has been manipulated, it is important
that you convey those doubts to the CFTC. This is the
chance to put this matter to rest, once and for all.

Alan Sobba from the CFTC told me that the commission
will accept written commentary in either postal or e-mail
form. I'm enclosing a copy of the letter I am sending and
you can use that address for regular mail letters, or e-mail
to Mr. Sobba, who will forward them to the proper
destination, at

Please feel free to use my letter, portions of that letter,
or anything I have ever written to supplement your own
correspondence. Remember, your comments will be
recorded as part of the public record, so you want to
be professional and concise.

You'll note in my letter to the CFTC I have offered three
constructive solutions for restoring public confidence
in the integrity of the COMEX silver market. One is new:
Require real public representation on the NYMEX/COMEX
Board of Directors, replacing the old boys' network that
now exists. Put someone like me on the board and this
mess will be cleaned up in short order.

And let me be very clear about something -- while there
is no doubt that this whole exercise could have a
profoundly favorable impact on the price of silver, the
most important positive development could be the
freeing of a manipulated market. That would be the
achievement of a lifetime for all who participated.
Good luck.

* * *

February 9, 2004

Michael Gorham
Director of Market Oversight
Commodity Futures Trading Commission
3 Lafayette Centre
1155 21st Street, NW
Washington, DC 20581

Dear Mr. Gorham:

This is in response to the commission's February 6
solicitation for public comment regarding your
continuing study on the self-regulatory organization
(SRO) structure of US licensed futures exchanges.
I thank the commission for the opportunity to comment.

I will confine my remarks to just one exchange and one
market, the silver market of the Commodity Exchange
(COMEX) division of the New York Mercantile Exchange
(NYMEX). As you may know, many members of the
public, numbering in the thousands, have serious
concerns as to the governance of the COMEX, to the
point that it is undermining public trust in the integrity
of the silver market.

To prove that the public distrusts the NYMEX/COMEX,
I am enclosing a copy of a grassroots petition that sprung
up spontaneously on the Internet. There are more than
2,500 names and numerous comments, all expressing
distrust of the governance at the NYMEX/COMEX. I ask
the commission to review each name and comment. You
will note that the petition was addressed to the attorney
general of New York, Eliot Spitzer, precisely for the reason
that the public distrusts the governance at this exchange,
as well as, unfortunately, the commission itself.

Self-regulation has not worked at the NYMEX/COMEX.

The public knows that there is something very wrong with
a market that has been in a documented and verified
structural deficit, with no corresponding sharp rise in
prices. The public knows that there is something wrong
with the naked short position in COMEX silver that is
greater than world production and many times greater
than total visible world silver inventories, unique among
all commodities. The public knows there is something
very wrong when eight or fewer traders hold a concentrated
net short position that is seven times greater than annual
U.S. silver mine production.

When the public actually hears constructive solutions to
serious problems that are ignored or intentionally evaded
by the regulators, it has every right to doubt the integrity
of the silver market. Here are some specific, constructive
solutions that will terminate the silver manipulation and
restore public confidence in the integrity of the COMEX
silver market:

1. Institute legitimate speculative position limits in silver,
as required by existing commodity law. Those limits should
not exceed 1,500 contracts (7.5 million ounces) net short
or long for all months combined, matching the current spot
delivery month's position limit. Bonafide hedge exemptions
from speculative position limits should be allowed, in
keeping with existing law, but the big New York financial
institutions that are speculators masquerading as
legitimate hedgers must not be granted bogus exemptions,
as they are granted currently.

2. Require that all shorts in the spot delivery month must
deposit unencumbered COMEX warehouse receipts by first
notice of delivery day, equal to their short position.
Likewise, require all longs in the spot delivery month to
deposit the full cash value of their contracts by first notice
day. This would guarantee tat there will be no delivery
default and should be adopted in all licensed physical
commodities markets.

3. Require legitimate public representation on the Board
of Directors of the NYMEX/COMEX, not the sham
representation now in force. As it is, the COMEX rarely
responds to the public's questions and comments, even
though it is licensed by Congress and serves as a
public financial institution.

The COMEX and the commission itself have been strongly
resisting ending a manipulation that the public recognizes
more each day. While I doubt very much that you will be
receiving any grassroots petitions regarding the governance
of any other exchanges or complaints of manipulation on
other exchanges, a common, everyday nickname for the
COMEX on Internet sites is the quot;CRIMEX.quot; If the commission
truly wants to restore the public's confidence in the integrity
of the COMEX silver market, please adopt my solutions.

Sincerely yours,

Ted Butler


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