04 December 2014
Blatant and massive market intervention
Kid Dynamite tweeted the pic below yesterday, cc @pcraigroberts, in response I guess to this post. He has stopped posting his monthly summaries (see here) of one-eyed gold commentary that only sees big downwards moves but ignores the big upwards moves.
The text in the Paul Craig Roberts post is a classic of this type. For a bit of fun, lets take that text and rewrite it to fit the chart above. I can guarantee you will never see this sort of analysis on the gold blogosphere.
In a blatant and massive market intervention, the price of gold was ripped on Monday Right in the early hours when the US was sleeping with 15,000 paper gold contracts bought representing 42.5 tonnes of gold. Prices were jacked higher on Comex futures market again at 9:30a.m. EST with ANOTHER 15,000 contracts. Finally after lunch 20,000 paper gold contacts were pumped on the Comex futures market.
No relevant news or events occurred that would have triggered this sudden rally in gold. In fact, any logical person would have expected gold to FALL on the news that the SNB would not be buying billions of Francs worth.
A rational person who wants to buy gold because he believes the price will rise wants to obtain the lowest price for the contracts he buys in order to maximize his profits when he settles the contracts. If his purchase of contracts drives up the price of gold, he reduces the spread between the amount he pays for his contracts and the price at settlement, thus minimizing his profits, or if the price goes against him maximizing his losses. A bona fide buyer speculating on the direction of the gold price would choose a more liquid market period and dribble in his contract purchase so as not to cause a significant impact on the price.
As you can see from the price-action on the graph, massive purchases concentrated within a few minutes maximizes costs and are at odds with profit maximization. A rational buyer would not behave in this way. What we are witnessing in the bullion futures market are purchases designed to drive UP the price of bullion. This is price manipulation.
BTW, I note that gold commentators have not given much if any coverage on the Senate Permanent Subcommittee findings on “Wall Street’s massive involvement in physical commodities" that was all about restricting physical deliveries, warehousing etc that industry claimed was pushing UP the price of commodities.