Gold manipulation revisited

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Erik T.'s picture
Erik T.
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Posts: 1234
Gold manipulation revisited

There has been plenty of discussion and debate in the past on this site about whether the price of gold is really being manipulated by governments, central banks, or big Wall Street influences. Much of the past discussion has been fairly speculative and subjective. But look at this:

 

This started at 2:17am New York time when most traders were sleeping. I happened to be watching the chart live here in Hong Kong, as it was mid afternoon. Gold had been meandering along all day on very low volume, then suddenly WHAM! The volumes picked up and the selling pressure was intense.

As the price was hovering around 1051, I was thinking to myself "Hmm, 1050 is going to be a psychological level. I bet there will be plenty of stops there. I bet that's what someone is gunning for. Then WHAM-O! 2,000 contracts in a single tick!!! I've never even seen that before.

For anyon who isn't intimately familiar with futures trading, what this means is that when the price was hovering around 1051, somebody said to themselves, "Hey, I want it to go down to 1050, so I'll just dump some gold without regard for being efficient in my trading style, because I want my sale to push the price down." That sort of thing happens all the time, and is called "selling sloppy". But in this case, the person in question threw two hundred million dollars out the window in a single mouse click! Nobody has that much money to throw around in an intentionally money-loosing trade other than governments. And that was just one tick. If you assume that most of the downward selling pressure from 1065 to 1047came from someone with an agenda to manipulate the market lower, you can add up all those individual volume bars and deduce that they spent several billion dollars in the course of about five hours. Even my ex-girlfriend from Long Island can't spend money that fast!

I am making a big assumption here that there was no extraordinary news that came out at 2:17am to explain a fundamentals-driven sell-off. Anyone know of any explanation for this other than government/central bank manipulation?

Erik

 

JAG's picture
JAG
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Posts: 2492
Re: Gold manipulation revisited

Hi Erik,

I know your looking for Dr.M's take on this and not mine, but I'll offer up my 2 cents for the sake of conversation.

Even though there is ample evidence that the world's central banks have both the motivation and the means to manipulate the gold market, I think it is a mistake to attribute moves in the market to manipulation. Why? Because it changes one's trading psychology into a situation where one is not trading the market, they are "investing" in a self-image. Its hard enough remain objective in trading/investing, the last thing one needs is to reinforce the "us-vs-them" mindset that is ubiquitous in the gold market.

Bottomline: Even if market manipulation is blatantly obvious (as it is here), it does one more harm than good to acknowledge it.

All the best...Jeff

 

Ken C's picture
Ken C
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Posts: 753
Re: Gold manipulation revisited
JAG wrote:

<snip>

Bottomline: Even if market manipulation is blatantly obvious (as it is here), it does one more harm than good to acknowledge it.

<snip>

 

It is hard for me to believe that you are actually advocating that one stick his head in the sand and ignore the obvious. I would look at this as an opportunity to accumulate.

 

Ken

 

Farmer Brown's picture
Farmer Brown
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Re: Gold manipulation revisited

Erik,

If I knew I was going to own 2,000 contracts worth of gold come December, and I wanted to sell, I would look to locking in a contract price to do so.  Who would do that?  How about gold producers, especially one that just bought back all it's forward contracts and may be looking to replace them,  or gold buyers who have December long calls coming in, etc etc.  I'm not saying manipulation isn't possible, but there sure seem to be a lot of other reasons.  Maybe someone wanted to lock in a price and already had a buy-trigger inplace in case .  Computers don't care if it's 2:17am. 

JAG's picture
JAG
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Re: Gold manipulation revisited
kenc wrote:

It is hard for me to believe that you are actually advocating that one stick his head in the sand and ignore the obvious. I would look at this as an opportunity to accumulate.

No Ken, what I'm saying here is that by acknowledging market manipulation you are "sticking your head into the sand" and thus are blind to any other market forces at play.

(edit:sp)

Cloudfire's picture
Cloudfire
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Ignorance is bliss?

Whoa, JAG;

Ya lost me there . . . By this logic, it would be better to not acknowledge the likely adversarial nature of the fellow following you with pointy object in his pocket . . . On the notion that you're likely to respond more appropriately, by acting as if he doesn't exist . . . Even if you're wrong about the suspected mugger, your resultant mistakes from that error would be a lot less devastating than if you're suspcions are correct, but you ignore them.

I can't believe that this is logical to you, so I must be misunderstanding what you're saying . . .

JAG's picture
JAG
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Re: Ignorance is bliss?
Cloudfire wrote:

I can't believe that this is logical to you, so I must be misunderstanding what you're saying . . .

"You" see what you want to see, because it confirms who you think you are. As a trader this is death by subjectivity..

In your analogy, I would say that your so worried about the guy with the knife behind you that you step out in front of a speeding bus. 

All I'm saying is that fixation and awareness are mutually exclusive.

bklement's picture
bklement
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Re: Ignorance is bliss?

What I find interesting is that the amount of contracts in one fell swoop is so large. 

That's 1/4 of the monthly output of China.  No effective trader would ever put that amount of selling pressure on the market unless their intent was to drive down the price and not care what they actually got for a selling price.  It seems the intention is pretty clear, but the source remains the question.

DrKrbyLuv's picture
DrKrbyLuv
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Posts: 1995
Re: Gold manipulation revisited

The spike looks fishy...I could see traders looking for a high before a correction but not at this rate.  I thought that I'd find that the dollar had a bounce,  but it didn't, in fact it's down right now (speaking of currency the British pound is getting hammered).  It will be interesting to see if China goes bargain hunting with paper tonight (my time).

ErikTownsend wrote:

I happened to be watching the chart live here in Hong Kong, as it was mid afternoon.

Hi Erik,

If ya don't mind I have a quick question.  I am hearing rumors that China is stopping the international sales of their domestic gold production (I think they are the number 1 producer).  Any news there?

Larry

SagerXX's picture
SagerXX
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Posts: 2252
Re: Gold manipulation revisited

As a fella who's pretty much a neophyte at all this (but interested in learning nonetheless), is it possible somebody somewhere (with a buncha gold contracts in hand) got caught in a short squeeze somewhere else and had to liquidate the gold posish in a big fat hurry to cover the other bets?  

Viva -- Sager

Cloudfire's picture
Cloudfire
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Posts: 1813
Re: Ignorance is bliss?
JAG wrote:
Cloudfire wrote:

I can't believe that this is logical to you, so I must be misunderstanding what you're saying . . .

"You" see what you want to see, because it confirms who you think you are. As a trader this is death by subjectivity..

In your analogy, I would say that your so worried about the guy with the knife behind you that you step out in front of a speeding bus. 

All I'm saying is that fixation and awareness are mutually exclusive.

Who's fixated? . . . I don't trade gold . . . So, I'm hardly fixated . . . Nay, I'm barely interested in what causes gold to go up or down relative to dollars . . . Or whether it is up or down, for that matter.  But, it seems that, for people who are, it would behoove them to be aware of all data and possibilities, as when walking on any busy street.  I'm just saying that it makes no sense to me to willfully block any observation . . . If you're going to walk down the street, at all . . . But hey, it's your walk, not mine  . . .

JAG's picture
JAG
Status: Diamond Member (Offline)
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Posts: 2492
Re: Gold manipulation revisited

Cloudfire,

I wasn't speaking of you personally. Thats why I used the quotation marks on the word you. Sorry for the misunderstanding....poor writing skills on my part

Jeff

PS: I would have PM this, but your PM is not available.

Jim H's picture
Jim H
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Posts: 2391
Regarding Gold dust from Ghana...

Until our usually alert moderators take these posts down.. and not that I am worried that anyone here on CM would for a minute consider the above entreaty... but just to be sure;

http://www.emirates247.com/markets/gold/tons-of-gold-imports-turn-to-dus...

"Several tons of gold imported into the UAE by traders and investors turned out to be fake on closer inspection, resulting in millions of dirhams in losses and high levels of stress to the victims.

Speaking to Emirates 24|7, Mohamad Shakarchi,, Managing Director of Emirates Gold, said: "A lot of people in the UAE who tried to import gold at lower prices or through dubious overseas companies have been cheated.

We have inspected many consignments from African countries, especially Ghana, and found that there is not an ounce of gold in them."

Jim H's picture
Jim H
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Posts: 2391
Gold Market Manipulation and (fiat) endgame investing

These kind of non-economic sales of PM's.. meaning that so much is dumped, at so illiquid a time of day, that it can't be targeted at anything other than causing a waterfall drop in the price, are to me a screaming sign of market manipulation.  Why is this important to know?

For me, it confirms my own hunch that there continues to exist an arb on a final, parabolic blow off for the metals.  Gold is the anti paper... and governments and central bankers have a vested interest in keeping the true terminal condition of their fiat currencie obscured.  There are lots of factors lining up that will make the process of manipulating ever more difficult (China's PAGE coming on line, visible tightness in the physical coin/bar markets, CTFC's upcoming ((maybe)) vote on position limits, etc)  so I believe that the markets will eventually break the bounds of manipulation, in conjunction with a broad, inflation-driven loss of confidence in fiat.  I believe that very few will actually participate in this blow off, having been effectively scared off of PM's by the kind of induced volatility we are experiencing now.         

In the meantime, acknowledging the manipulation helps free me to trade a bit in the shorter term - I don't have any idea when we enter the parabolic phase.. but I think we will know it when we see it.  This outlook would be subject to change if I saw signs that we were headed toward a more Volcker-esce approach to money... but I think we all know how slim the odds of that happening are.

This discussion brings to mind a thought that I have been mulling for some time;  Silver vs Gold, and their relative ability to be manipulated.  

Consider;

1)  There is much more above ground tradable Gold than Silver    

2)  Central banks own large caches of Gold that can be sold or leased to control price.. not so for Silver

So, while Silver has been more volatile than Gold as of late... I wonder if there will come a time when it becomes less able to be manipulated downward than Gold?  If the CTFC votes for position limits, it will effectively kill the cartel's ability to use unlimited paper shorting to directly affect Silver waterfalls.  At that point, the only central bank-like cache of Silver will be SLV, which of course is under the control of the bullion bankers, and must be acknowledged.  

      

          

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