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XMFSinchiruna (27.75)

The Manipulation of Gold Prices ...

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December 05, 2008 – Comments (14)

... is so very obvious. Anyone who follows the daily charts as I do will see that like clockwork gold and silver are hammered southward minutes after the 8am NY open day after day after day after day ... only to be bought back on the overseas markets so they can do it all over again on the COMEX. Those who follow my work also know that I track the long and short gold positions of the major investment banks on the TOCOM, the Tokyo exchange, where parties in transactions are actually listed by name (I know, a novel concept). The article linked here does a great job of explaining / positing what is going on behind the scenes that no one seems willing to talk about.

http://seekingalpha.com/article/109210-the-manipulation-of-gold-prices?source=feed

Excerpts:

Rarely was there ever a serious short-squeeze. Rarely, that is, until Friday of last week when the deliveries demanded by non-leveraged long buyers reached record levels. In spite of an avalanche of complaints from gold and silver investors, the CFTC (Commodity Futures Trading Commission) has never bothered to audit even one vault to see if the short sellers really have the alleged gold and silver they claim to have. There is a legal requirement that, in every futures contract that promises to deliver a physical commodity, the short seller must be 90% covered by either a stockpile of the commodity or appropriate forward contracts with primary producers (such as miners). Inaction by CFTC, in the face of obvious market manipulation, implies a historical government endorsed price management.

Things, however, are changing fast. As previously stated, the first major mini-panic among COMEX gold short sellers happened last Friday. As of Wednesday morning, about 11,500 delivery demands for 100 ounce ingots were made at COMEX, which represents about 5% of the previous open interest. Another 2,000 contracts are still open, and a large percentage of those will probably demand delivery. These demands compare to the usual ½ to 1% of all contracts.

 ...

The fact that this backwardation is hidden from the public eye is not surprising. In spite of the ostensible existence of a so-called “London fix”, 96% of all OTC transactions are secret and unreported. The transactions happen solely between two parties, and are done opaquely, in complete darkness. The current London fix may well be just as fake as the bank interest rate reports that comprised LIBOR proved to be, just a few months ago.

It won’t matter much if you purchase gold at $750, $800, $850, $900 per ounce, or even much higher. All of these prices will be looking extraordinarily cheap in a few months. The price of our pretty yellow metal is about to explode, and it is probably going to soar, eventually, to levels that not even most gold bugs imagine. COMEX gold shorts will be playing the price a bit longer, in an attempt to shake out some remaining independent leveraged longs. Once that is finished, however, and it will be finished soon, the price will start to rise very quickly.

 

 

14 Comments – Post Your Own

#1) On December 05, 2008 at 10:38 AM, goldminingXpert (29.43) wrote:

I see supply and demand today. There is lots of supply and very little demand. When there are more sellers than buyers, prices decline. I've been selling short gold mining shares for the past week and a lot of other smart like-minded people have as well. Thus, lots of supply and little demand. Demand is low due to the fact that we are entering a deflationary depression and China is devaluing their yuan, making the dollar even more valuable.

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#2) On December 05, 2008 at 11:06 AM, amassafortune (29.41) wrote:

Unemployment is the worst since 1974 and 7% of all mortgages are now delinquent. With today's unemployment numbers it was also revealed that over 600,000 workers have dropped out of the numbers (no job and no unemployment check). 

More people each week are living off savings or have gone through their savings. Gold and silver bars, jewelry, and coins are being converted to cash. Industrial metal demand has plummeted. In 2009, expect more people to deplete 401Ks as a last resort, putting more downward pressure on stocks and metals.  

Deflation is the greater risk at this point so gold's weakness will continue. 

Once the bottom is found, the risk turns to inflation very quickly due to all the stimulus (debt) it will take to find the bottom. Gold at this level will seem cheap, but I think the horizon you need to consider is more than just a few months.  

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#3) On December 05, 2008 at 11:13 AM, DarkToast (48.92) wrote:

There was a great article on the same subject at Market Oracle. It is pretty obvious, to me anyway, that gold prices are being surpressed and have been for months. Being 'right' about the direction gold should be taking does nothing for me though.

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#4) On December 05, 2008 at 11:24 AM, tsk5299072 (< 20) wrote:

What's the effect on gold coins? Are they still a good investment against infation or should we just focus on gold stocks? This question is based on long term investment.

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#5) On December 05, 2008 at 11:31 AM, DarkToast (48.92) wrote:

tsk5299072

Physical gold is selling at a premium to the spot price in most places. Using the Microsoft LIVE search to find 'buy it now' auctions on ebay gives you a 20% discount, so you can find physical gold for less than spot sometimes.

In my 401k I have to buy gold stocks to get exposure to gold (GOLDX) but for personal investing I have Canadian Maple Leaves and some Iranian coins from the 1970s. The Iranian stuff is signifigantly less pure than the Canadian, but they are cool.

 

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#6) On December 05, 2008 at 11:33 AM, XMFSinchiruna (27.75) wrote:

goldminingXpert

That's funny, I could have sworn that my very last blog post established that gold demand has in fact reached record proportions amid a declining supply. Hmmm.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=115725&t=01006124249416869148

 tsk5299072

gold coins are a fantastic long-term investment, IMO.

 DarkToast

I agree, it's little consolation at this point. And theone thing I agree with GMX about above is that China will likely continue to devalue the yuan and thus contribute to the extension of this odd dollar rally. But the game changer would be if a few dozen millionaires would simply take delivery of their COMEX gold bars and prevent the naked shorting investment banks from shorting gold without the corresponding supply.

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#7) On December 05, 2008 at 12:04 PM, goldminingXpert (29.43) wrote:

I was talking about investment demand, not physical demand. As long as the economic hard times continue, the doom is near bomb shelter people will hoard physical that central banks sell. Once the economy recovers, the banks will buy back their gold from the doomsayers at a big profit. If I'm a central bank and I can sell gold at 800/oz and buy it back at 500, I'm a happy guy. Retail is dumb money, and they're buying like mad.

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#8) On December 05, 2008 at 2:40 PM, XMFSinchiruna (27.75) wrote:

goldminingXpert

Are you predicting $500 gold??

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#9) On December 05, 2008 at 8:12 PM, GNUBEE (28.48) wrote:

Sinchy,

In your last blog, was I understanding correctly? "paper" trading is being manipulated down. And this was possible because many never took delivery.

And in this blog people are choosing delivery,and  the manipulation is not working so well?

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#10) On December 05, 2008 at 9:24 PM, mickeyc21 (29.45) wrote:

goldminingexpert - not sure how investment demand and physical demand can differ (in theory at least). If you buy an ETF the corresponding quantity of gold must be bought.

In the real world we are seeing a gap between gold in paper form and actual gold. Not too sure how this proves a sellers market.

The Perth Mint has suspended sales due to too much demand - including a sale to an individual of $33 million. 

I have no idea what your personal financial situation is but I'm going to take a wild guess here and say you don't have $33 million you can do without for a while. Marc Faber has made it obvious he has moved a significant portion of his wealth into physical gold and he is the ONLY person with a public profile to have got the turns right this year. If this is dumb money you can include me in it.

Anyone who thinks the dollar will increase in value under quantitive easing is not paying attention in my opinion. We do currently have severe deflation. An unlimited supply of new money - which is policy since October - has already had an effect on the market. New money is an infinite resource. The debt load (however staggering an amount) has a finite number. Bernanke will "win" eventually and the new money (and a likely forced currency devaluation in my opinion) will take hold.

This wont be enought to save us from a depressionary enviroment.

In that enviroment gold may not be worth more in comparison to other commodoties as it is now - who knows? It is extremely likely the nominal dollar value of gold will be higher - and owning gold sure beats having a ton of cooper sitting on the front lawn.

 

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#11) On December 06, 2008 at 3:59 AM, jester112358 (28.71) wrote:

Yes, I too want to be with the "dumb money", such as Marc Faber, which has caused an incredible shortage of real gold.  This is simply sound hedging (such as owning real guns and ammo & food) in the event of a complete collaspe of capital markets-which we may still experience.  If you trade options, you might want to read the conditions for satisfying contracts between parties in the event of a default in a market maker (i.e. there is no market).  To summarize, you will have only "paper" profits or losses.  Think this can't happen with your Puts and Calls on whatever?  That's what people in the MBS, CDO and SIV derivatives market believed until those markets collasped.  Now they just have a piece of paper or a digital record of what they might have received or paid.  CDSs are equally phony.  I believe this situation could easily occur with equity and index derivatives.  There's a lot of naked shorting or selling on margin there too, and just one major market maker defaulting will bring down those markets too.  Then you'll want to own real money i.e. gold, for bartering purposes.  And guns/ammo for enforcing contracts on that barter.

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#12) On December 07, 2008 at 5:37 AM, mintork (< 20) wrote:

I am dumb money too...  :-)

But; I am market researcher, and so I understand very well statistical matters. And I have observed the same pattern at 2-3 pm (Europe time) every day, except those days in which gold is not rallying....

Unless there is a piece of news every day at 2-3 pm that makes the whole market start selling in panic on a daily basis, the dynamics in the price of gold can only be explained by systematic market manipulation.

Mr. Gold Mining Expert: can you explain that to me?

 

 

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#13) On December 08, 2008 at 12:47 PM, goldminingXpert (29.43) wrote:

sure, I'll take the bait. $500/oz gold is coming.

Mintork, it isn't manipulation so much as just automated computer trading systems doing whatever it is that they do. 

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#14) On December 09, 2008 at 5:04 PM, XMFSinchiruna (27.75) wrote:

 

http://www.commodityonline.com/news/Gold-Cartel-suppressing-manipulating-gold-price-13224-1-1.html

Gold Cartel suppressing, manipulating gold price

Robert Rubin and gang took heed … as are more and more in the mainstream financial world. Just last week, the highly regarded Don Coxe of the Bank of Montreal stated the following in an audio presentation last about recent market action to the bank’s clients:

“The Most Massive Intervention Of Government Into The Capital Markets, Or The Financial Markets, Since President Roosevelt Closed The Banks Back In 1933,”

It’s wake up time, finally.

Recently, there has been talk about the Working Group on Financial Markets (more commonly known as The Plunge Protection Team), which consists of the President, Treasury Secretary, and heads of the CFTC and SEC. Think about it … why are bureaucrats included in meetings about the markets except to look the other way regarding government intervention?

To give you an idea just how pervasive and insidious our markets have become, I bring your attention to the Counterparty Risk Management Group. Ever hear of it?

It consists of major players in the investment banking/hedge fund community in New York, including Goldman, Sachs., Citigroup, JPMorgan Chase, and Deutsche Bank (all defendants in GATA’s Reg Howe’s suit against The Gold Cartel in 2001). There are a number of other participants such as the famed hedge fund of Paul Tudor Jones.

On July 27, 2005, E. Gerald Corrigan, former President and CEO of the Federal Reserve Bank of New York, and now a Managing Director of Goldman Sachs, wrote:

The Report of the
Counterparty Risk Management
Policy Group II

Addressing it to:

Mr. Henry M. Paulson, Jr.
Chairman and Chief Executive Officer
Goldman, Sachs & Co.

(all roads always lead back to Goldman Sachs)

He stated;

CRMPG: “since we know that financial disturbances and even financial shocks will occur in the future, and we know that no approaches to risk management or official supervision are fail-safe, we also know that we must preserve and strengthen the institutional arrangements whereby, at the point of crisis, industry groups and industry leaders, as well as supervisors, are prepared to work together in order to serve the larger and shared goal of financial stability.”

This Orwellian shared goal of financial stability, which began with the serious rigging of the gold price under Robert Rubin, has led us to the financial market mess we have today. It is wrong and must be stopped!

Now, you know what they say if it looks like a duck and quacks like a duck!

Bill Murphy is Chairman, Gold Anti-Trust Action Committee (GATA)

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