War on Precious Metals Continues: Silver Margins Raised 5 times in 2 weeks!

The war against precious metals, which I earlier pointed out, continues.

This from Reuters,

The CME Group (CME.O) sharply raised silver futures margins for a fourth and fifth time in under two weeks, an 84 percent rise in trading costs that has helped provoke a nearly unprecedented sell-off.

The 20 percent slide in silver prices since they touched an all-time high of $49.51 an ounce on April 28 has been in large part driven by selling from speculators who may be unable or unwilling to bear the surging cost of holding positions.

Holdings in the world's largest silver-backed exchange-traded fund, iShares Silver Trust, fell by 521.8 tons, or 4.78 percent, from the previous session to 10,387.26 tons by May 4.

The CME, which typically raises margins when volatility in markets increases, dealt the latest blow on Wednesday, announcing two separate, successive margin hikes.

It said margins would rise to $14,000 per contract from$12,000 effective Thursday, May 5, and again to $16,000 effective Monday, May 9. Prior to April 25 the margin stood at $8,700 per contract. One contract holds 5,000 ounces, worth about $200,000 at current prices.

Silver seems to be leading the rest of the other important commodity benchmarks as gold and oil (WTIC) down.

We also have reports that George Soros may have been unloading his holdings of precious metals.

Declining commodities have likewise placed some pressures on some emerging market stock markets as shown by the EEM index.

The point of all these seeming assault on precious metals could be to impress on the public that the Fed’s policies have not been inflationary.

And the possible deployment of price controls via higher margins appears to be supported by propaganda efforts from the US Federal Reserve, which has been issuing a stream of research papers.

Notes the Wall Street Journal Blog,

Over recent months, there’s been a steady flow of research coming out the Federal Reserve’s regional branches that aims to assess the risks generated by surging food, energy and commodity prices.

The latest comes from the Federal Reserve Bank of Boston, and it fits the arc described by much of the existing central-bank writings, which holds that long-run inflation in the U.S. is likely to remain under control despite rising prices for things like gasoline, food, and raw materials used in factories.

In the paper released Wednesday, Boston Fed researcher Geoffrey Tootell wrote “evidence from recent decades supports the notion that commodity price changes do not affect the long-run inflation rate.” He noted his conclusions in the paper were drawn from a brief given to his bank’s president, Eric Rosengren, to assist the official in preparing for a recent Federal Open Market Committee meeting.

In my view this is part of the orchestrated efforts to condition the public for the next round of QEs, particularly QE 3.0.

First is to apply the necessary interventions on the market to create a scenario that would justify further interventions.

Second is to produce papers to help convince the public of the necessity of interventions.

Then lastly, when the 'dire' scenario happens, apply the next intervention tools.