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.
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Bron, in general I agree with your commentary on the pathetic nature of the "pound the table" gold blogs and other writers. It is ridiculous in the extreme.
ReplyDeleteAnd yet.... the one thing I can never ignore is that the price of gold has been "engineered" at almost any time in the past you care to point to, at least for times when we have good historical data. Engineering a gold price that is beneficial to monetary policy is just part of the policy toolset.
So, has that engineering disappeared in the past 40 years? Hard to imagine it has.
I guess we will have to wait until the current players are all dead and the information slowly becomes available historically. Time will tell.
"So, has that engineering disappeared in the past 40 years? Hard to imagine it has."
ReplyDeleteIndeed, it has not - it has changed hands! Up until the 2008 crisis, the ability and willingness to manipulate gold price lay with the western central banks and their top level controllers.
The period of transition which ensued resulted in some 'rough patches' such as near $2000 gold, but by 2012 we saw the convergence between the western financial players and the Chinese to keep price of au at a level conducive to the(short term)interests of the one, and the(long term) interests of the other.
The Chinese gradually refined their techniques, and their leverage over the westerners, to the point that they have now succeeded in controlling the gold market globally.
They have created a self-reinforcing feedback loop whereby the leverage of their treasury holdings is being used to fund and generate the profits which accrue from their massive market interventions - far surpassing the scenarios which western analysts have painted of the easterners methods and intent.
A virtuous cycle indeed... depending upon where one hangs one's hat!
Well, if gold can be manipulated down then, it can also be manipulated up. What is so hard to understand about that? Kid D seems to think that he discovered an Eureka moment. And Bron by showcasing his nonsense you encourage his trolling.
ReplyDeleteAnon @ 1:50 - you seem confused. this post showcases the nonsense of charlatan fraudsters like Dave Kranzler and Paul Craig Roberts.
ReplyDeleteKid, that is fair enough and yes, I agree with you there. Your main point is that gold can and is being manipulated up. OK, we get your point as you endlessly continue to call it to our attention. Perhaps look up the definition of the Yiddish word "Yenta"
ReplyDeleteSlow Loris is having problems posting a comment and has asked me to post the following for him:
ReplyDeleteCome on, guys!
Why is it so hard to for some to recognise that what happened on Monday was that the Commercials, who were long, were just harvesting the Technicals, who were hugely short, and that the quicker they could do it, the bigger the heap of money they could gather in.
So, is the gold futures market 'manipulated'? Of course it is, all the time, but in both directions, given that lax position limits and HFT allows big money to push prices to their advantage from time to time, mostly in small moves but sometimes in huge ones.
"What is so hard to understand about that?"
ReplyDeleteYeah exactly but a massive majority of blogosphere don't/can't/won't admit it.
Bron, Oh yes they will! It is pretty well understood,imho, that hedge funds and banksters will push, shove and manipulate...all for a profit, if they can get away with it. Normal course of doing business.
ReplyDeleteHowever, what the goldbugs are referring to when they shout out Manipulation is something entirely different. It is no longer counterparties, pushing each other out of position. It is rather very massive paper shorting, during the illiquid trading hours with no regard for price. Of course Jeff Christian will try and convince us that those are no longer Illiquid hours and Armstrong will make a statement that in all his years of trading that he has never seen gold manipulated down...only up!! Right, we are all supposed to still believe in the tooth fairy.
Of course the mother of all gold manipulations happened in mid April, 2012. Some 400/500 tons of paper gold were machine gunned into the markets quiet hours triggering all the stops and generating massive margin calls. The Sherlock Holmes story of 'the dog that didn't bark' comes to mind. For here we had two dogs that didn't bark, the CME and the CFTC. Like Sherlock explanation this was an inside job...a sanctioned event. Who sanctioned it? Was it the BIS or the NY Fed or the PTT, or a combination. Well, it happened, it's reality and these major manipulations are staring you right in the face.
Sorry, date as referred is 2013, not 2012. Mea Culpa.pos
ReplyDelete