The Manipulation of Gold and Silver Prices 35 comments
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Here is an article you may want to forward to your favorite mining CEO.
This article deals with the blatant manipulation that has been occurring in the gold and silver markets, and offers a solution. While this scandal has been going on for many years, at last more and more people are becoming aware that it is going on.
One of the first people to document the ongoing attempts to suppress the gold price was Frank Veneroso. Next was Bill Murphy of GATA.org. GATA continues to press the issue. Gata has discovered that the IMF instructed its member banks to treat gold that had been leased to bullion banks and sold into the market as if it were still in the vault! Imagine if an entrepreneur was running his business in this underhanded manner – how long would the government allow that?
A few years ago John Embry, while he was Portfolio Manager at RBC Global Investment Fund - a multi-billion dollar resource fund at the Royal Bank - prepared a memo for the bank’s clients that detailed the manipulation in the gold market.
Ted Butler has written extensively on the manipulation in the silver market.
This is something I have observed first hand since I became interested in silver in the mid-1960’s. It seemed that every time silver reached a peak, an invisible hand came out of nowhere and knocked the price back down to the starting point again. I wrote an article about this titled: ‘Once upon a time, in Never-Never Land.’
Every time a geo-political event, or a serious economic happening, such as the collapse of Bear-Stearns, causes gold to rise, (as it would be expected to do since it has always been a ‘safe haven investment’), the price immediately gets trounced, and investors and producers accept this new price as ‘THE price,’ since the new event has now been discounted.
Whenever common sense tells you something is happening that should cause a rise in the price of gold and silver, you can count on intervention to cap the price. As a result, millions of investors and mining companies have lost billions of dollars that they would have earned if these markets had been allowed to run their normal course.
The manipulation is obvious in the following charts:
click to enlarge
This chart shows steady buying interest that took price from the low at 955.00 on July 14th to 985.00 the next day. The buying took place in Asia, then Europe, and carried over for about an hour in New York, when suddenly, in the space of minutes, an unseen entity dumped gold in the form of futures contracts (green line), without any attempt to obtain the best price possible. In about 5 minutes the gold price was down by 15.00, and the rise was over, as price drifted sideways for the rest of the day.
It was discovered later that several large banks, suspected to be HSBC (HBC) and JPMorgan Chase (JPM) and possibly one other bank, had switched from being ‘net long’ 5,381 gold contracts at the beginning of July 2008, to being ‘net short’ 87,609 gold contracts by the end of July. That is a 94,000 contract ‘turnaround’ and smacks of blatant interference in the market place, since these banks do not produce gold, nor are they likely to be hedging against that much gold in the vaults, since they do not own physical gold. Such a dramatic switch without any change in fundamentals is beyond reason.
Featured is the daily gold chart from October 13th. The blue line shows steady demand followed by consolidation early on Oct 14th, as recorded via the red line. Then a mysterious seller showed up shortly after the COMEX began trading in New York, and in the space of minutes the price was knocked down by 30.00. This is totally illogical, since the seller has no interest in obtaining the best price. His only interest is to destroy the price.
“In 1980 we neglected to control the price of gold. That was a mistake.” Paul Volcker.
“Central banks are ready to lease gold, should the price rise.” Alan Greenspan during Congressional testimony July 24/1998).
Featured is the price action right after the COMEX began trading in New York on October 16th. Within a few minutes the price was knocked down by 35.00 (green line), after the price had established a solid trading range between 830.00 and 850.00 during the previous two days (red and blue lines). This illogical dumping of gold contracts caused margin related selling to bring the price down another 15.00 before bargain hunters were able to level the price around the 800.00 mark.
These are just some of the examples of ‘irrational behavior’ on the part of several large traders on the COMEX, whose actions are not being controlled by the people who oversee the COMEX. While this article deals primarily with gold, the same manipulation exists in the silver markets. To repeat an earlier comment, ‘millions of investors (including miners), have lost billions of dollars because of the manipulation.’ The US government is able to interfere in the markets by way of the Exchange Stabilization Fund which is run by the Federal Reserve and the Treasury Department. The size of the manipulation referred to in this article could not take place without the encouragement that is very likely provided by people who are highly placed in government.
CAUSE AND EFFECT
The effect of this manipulation in the gold and silver markets is an artificial low price. In view of the fact that bullish events are not being allowed to permit prices to rise, nevertheless these events will eventually have a positive effect on the price. The cause is real, but the effect is delayed. The steam in the kettle continues to boil, despite the lid being clamped down. The artificial low price stops the development of mining projects that would have been profitable at the higher price. The artificial low price also cuts into profit margins at every producing mine, making it more difficult to obtain funding for exploration to increase resources. Every mine in the world is at all times a ‘depleting asset’ and needs exploration to postpone the day when the last ounce is mined.
THE MANIPULATORS ONLY HAVE TWO WEAPONS
The ammunition used by the manipulators is provided by two sources: Central banks (including the IMF), and the COMEX. While there is nothing anyone can do about the gold selling that originates with the central banks, there are ways to choke off the amount of precious metal that flows into the COMEX warehouses.
Those of us who are tired of the manipulators picking our pockets need to become active.
In 1978 – 1979 it was a rising silver price that caused gold to rise – silver was the leader. It makes sense therefore to concentrate on silver, especially since the central banks do not have hoards of silver.
A SOLUTION!
Mining companies that supply silver to the COMEX need to find a way to turn their silver into small bars (1 oz to 100 oz), and 1 oz rounds and sell these to the public. Already some mines are doing this by selling from their website, and they are obtaining a hefty premium over the spot price. If your production is limited, join forces with a mine that is already merchandising silver products, or form a sales organization with other small mines. Hire some cracker-jack salespeople; there is a big market out there! Starve the COMEX if you want to see silver sell to realistic prices. Adjusted for inflation, the silver price of 48.00 that we saw in February of 1980, is trading at 4.00 today. (In 1980’s dollars, silver is now selling for 4.00 an ounce!)
Next, (and still communicating to mining CEO’s), instead of keeping money in the bank, or in various kinds of short-term notes, store up silver, and show us that you believe in the product you are producing. Instead of cash on hand, buy futures contracts, and keep rolling them over.
Coin dealers and wholesalers need to buy 5,000 oz bars from the COMEX, take delivery, and contact a refiner who will turn the silver into retail products. If your operation is not large enough for a 5,000 oz purchase then buy silver from people like Jason Hommel, who was smart enough to start doing this on a large scale.
Investors who can afford to spend $55,000.00 should consider buying a silver contract from the COMEX and taking delivery. James Sinclair at JSMineset.com will show you how to go about that.
Finally, anyone who holds any kind of a certificate that promises to deliver silver, needs to make sure that the bank or institution that stores the silver, is willing to provide bar numbers. Otherwise when the day comes to collect, you may find that the silver does not exist. On my website you will find an article that I wrote about a fund that stores gold and silver at a bank in Western Canada. They invite auditors twice a year to audit the inventory.
Cartoon courtesy Gary Varvel, Indy Star.
The Madoff scheme is but one example of the lack of oversight on the part of people who have been placed in the position of protecting the public. In the US Congress, two of the people responsible for the mess that was created by Freddie Mac (FRE) and Fannie Mae (FNM): Congressman Barney Franks and Senator Chris Dodd, are now part of the group that is trying to ‘fix’ the problem. The foxes are in the henhouse! It was Franks and Dodd, who for years received money from Fannie and Freddie, while they stood in the way of people who wanted to tighten the lending standard at these two mortgage lending institutions. Whatever happened to responsibility? Where is the outrage?
Featured is the weekly gold chart. Price is ready to breakout on the upside. The supporting indicators are positive (green dashed arrows). The 7 – 8 week cycles have been short (twice at 6 weeks). We are due for a longer cycle. A close above the blue arrow will indicate that week #4 is the start of a run up to the green arrow. Once 925.00 is reached, then 975 is next. Since Labor day, the Federal Reserve’s assets (including huge amounts of toxic assets), have increased from 905.7 billion to 2.3 trillion dollars. This, along with the increase in the monetary base is going to add to price inflation and will cause a lot of investment money to enter the gold market. The gold rally that started in November has only just begun.
Featured is the weekly silver chart. Price has been rising since late October. The supporting indicators are positive (green dashed arrows). A close above the blue arrow sets up a target at the green arrow.
Thanks to Eric Hommelberg for the idea to use ‘historic spot charts’ to make my case. I applied the 11th commandment: “Thou shalt use every good idea thou comest upon.”
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This article has 35 comments:
hedge funds dumping positions to raise cash.
Conspiracy theories...
www.occ.treas.gov/ftp/...
is for the 2nd quarter 2008, the most recent data available.
The data in the report are presented in such a manner as to exclude an outsider’s ability to exactly determine who holds what position. However, according to the report JPM holds $85 Billion in derivatives based on gold; what is NOT known is whether they have bought or sold, or more likely some combination of the two. $85 Billion in gold is approximately 3300 tonnes. The US government reportedly holds 8100 tonnes. Has JPM bought gold? If they’ve sold gold, do they have it to deliver? One may wonder.
My purpose here is to illustrate the reckless manner in which the big players have distorted what were once “normal” markets. JPM is not a gold miner, it is not a gold user, and it is not a central bank. Why, then, is JPM participating in the gold futures markets? For one reason alone: what was once a means for producers and users to hedge an actual production process has become a casino. The big investment banks have “trading desks” who engage in speculation. There is one more important point to consider: the entire COMEX gold open interest (all open gold futures contracts) at the end of 2nd quarter 2008 amounted to about 425,000 contracts, each worth about $93,000.00. This totals some $39.5 Billion. In other words, JPM’s gold derivatives alone totaled more dollar value than all the gold available on COMEX. Two things are clear: JPM participates in more exchanges than just COMEX (and engages in more activities than just futures); and, JPM has the horsepower to manipulate this market to its own advantage. Why is this allowed? It appears that the gold futures exchanges are a casino and JPM is the “house”. Goodness only knows what a similar review of their activity in credit markets would reveal.
However I completely agree with your statements on congressman Barney Franks and Senator Chris Dodd. Their behavior in stopping oversight of Fannie and Freddie in 2003 and significant donations from Fannie and Freddie are well documented (see taxfoundation.org for video).
Politicians of both stripes over decades are responible for this debacle. It is not really a conspiracy, but members of the media are largely left wing and not really motivated to investigate Democrats. The Democrats responsible for the final nails in the bankruptcy coffin to walked free.
The problem is that the ruse is up. The lies are being exposed and it is not pretty. The rug has been snatched from under our feet and we are tripping over ourselves and each other before we are trampled.
The world is a lot more dark and sinister than anyone wants to believe. Unfortunately, if you don't wake up and take action on behalf of yourself you will be more likely to be one of it's victims.
From the buy outs by Freddie and Fannie to the Plunge Protection Team and perversion of the CPI - there seems no limit to the games our hired help- the Federal Government - will play to make things look better than they are.
Inflation will come in with a crash in 6 to 18 mos and little will survive the onslaught other than commodities. Even they will lag the real rise in costs.
What is a poor citi9zen to do? Gold and silver will probably be commondeered by the DC mobsters - a matter of national security will be the claim. Get a farm and a barnfull of ammunition. Plow up and plant the road to your front door or take a trip to Paraguay with the Bushies.
Buy land---learn to raise your own food, and have a means to protect yourself from those who are going to be hungry and desperate.
Good God, I hope I'm wrong!!!
So they manipulate the market.
IS IT ILLEGAL?
Hedge funds and iBanks have been churning the stock & futures markets for years looking to squeeze some money here and there.
Tell me something I don't know,
Posters, you all are illustrating good points!
On Dec 30 09:03 AM ManAboutDallas wrote:
> There's never, EVER any "conspiracy" until it's exposed for the entire
> world to see, is there ?
In many cases the manipulation addicts are paid by the miners and others to promote the gold price in any way they can. I know little or nothing about Mr. Hamlin, and I certainly do not mean to accuse him AT ALL of being in that league. He may simply be fooled by the marketing manipulators' constant barrage as many others are.
I still love and own gold as a hedge just as I love and own home, car and health insurance. I don't really want to see any of them pay off, but I buy them "just in case". The rest is marketing hype and other uglier varieties of BS.
Please consider yourself invited to factually refute anything I've said above. Failing that, maybe you should choose your words a little more carefully.
On Dec 30 09:48 PM deuxsous wrote:
>In many cases the manipulation addicts are paid by the miners and others to >promote the gold price in any way they can.
> The rest is marketing hype
> and other uglier varieties of BS.
The stated purpose of futures exchanges was and is to provide a forum in which producers and users may exchange their risk to speculators. Without speculators there is no exchange of risk. What is there about that function which should make you angry and disturbed, seeing evil manipulators under every bed?
Please explain.
On Dec 31 12:05 PM The Boss wrote:
> If the Dollar and other fiat currency's are loosing purchasing value
> (which is a fact) via inflation why would anybody want to take them
> in exchange for their gold. What is the gold seller going to do with
> worthless fiat currency. If the Dollar becomes basically worthless
> what is the gold seller going to do with all that worthless paper.
> Seams to me that those who possess gold would hold on to it no mater
> what amount of worthless currency was offered.
>
> Please explain. I'll tell you what I'm doing with the gold coins I sell every now and then, I pay for expensive repairs on my vehicles or home that need to be taken care of, I wouldn't EVER just sell my gold to put the "money" in a bank act. or "under the matress"!!!!!!!
Please stop repeating the words of your evil master Rush Limbaugh. The media is owned by corporations. It is not liberal, it is not conservative. It is pro-corporate interest. And if you didn't notice, the Republicans controlled this country for most of the last decade, and while Democrats were complicit in the raiding of the American treasury it is absurd to give Republicans a pass. It is especially silly to hear the argument that Democrats stopped Republicans from legislating when the Republicans controlled both houses and the presidency. Wake up and smell the coffee. Rush has made hundreds of millions of dollars preaching to a choir of small-minded people who think "liberals" are to blame for everything wrong with this country. But it is the Republicans starting with Reagan who allowed and in fact encouraged Wall Street and large corporate interests to take over our government, supposedly because they "knew best" how to govern and how to manage their own money. Look how that worked out.
On Dec 30 01:13 PM jhm47 wrote:
> With Obama, Reid and Pelosi in virtual total control of our government,
> we are going to be in for at least four miserable years. I truly
> expect to see $10-$12 gasoline within the four years that Obama and
> his liberal leaders are in power. Food, and every other essential
> product will follow suit. Taxes will be raised to unheard of levels
> (there is already a scheme to raise the gas tax by $1.50).
>
> Buy land---learn to raise your own food, and have a means to protect
> yourself from those who are going to be hungry and desperate. <br/>
>
> Good God, I hope I'm wrong!!!
Plausible?
On Dec 30 08:12 AM Metzenbaum Scissors wrote:
> "Mysterious sudden drops"?
>
> hedge funds dumping positions to raise cash.
>
> Conspiracy theories...
Why don't the armies of NCGB's here at this site and elsewhere EVER get it???????????? It's enough to drive a good man to drink on New Year's Eve.
Happy 2009 to all NCGB's and the very few normal gold investors!
Your response fails to address the relevant piece of that paragraph; the part about JPM's relative size compared to the actual COMEX gold futures market. Are you suggesting that the size of JPM's gold derivative position is irrelevant or unworthy of concern? Do you assert that the size of JPM's gold derivative position does NOT give it the ability to move the market? If that is your assertion, please explain to us why not. Even granting a significant reduction to their "net" position, it is one thing for there to be "speculators" in a marketplace, and another thing for one player to have a total position double the size of COMEX OI.
If you knew that a market had a single player as dominant as that, would you speculate there? In such a market there is no such thing as "speculation", since speculation requires some uncertainty of outcome.
I spend my time on price analysis and fundamental analysis and leave the BS to others. I only bother to comment occasionally because the incessant BS pisses me off as wasteful, and I hate to see another generation of gold investors sucked into that vortex of ignorance. Gold is a very worthwhile investment asset, but the distractions of the "manipulationistas" are a real pain in the rear when people are trying to gauge the real market.
On Dec 30 08:47 AM SW Richmond wrote:
> The easy money policies of the Fed have caused distortions in the
> commodities futures markets, and the investment banks have been major
> players. The Treasury publishes a quarterly report of derivative
> exposure of US banks. This report:
> www.occ.treas.gov/ftp/...
> is for the 2nd quarter 2008, the most recent data available.
>
> The data in the report are presented in such a manner as to exclude
> an outsider’s ability to exactly determine who holds what position.
> However, according to the report JPM holds $85 Billion in derivatives
> based on gold; what is NOT known is whether they have bought or sold,
> or more likely some combination of the two. $85 Billion in gold is
> approximately 3300 tonnes. The US government reportedly holds 8100
> tonnes. Has JPM bought gold? If they’ve sold gold, do they have it
> to deliver? One may wonder.
>
> My purpose here is to illustrate the reckless manner in which the
> big players have distorted what were once “normal” markets. JPM is
> not a gold miner, it is not a gold user, and it is not a central
> bank. Why, then, is JPM participating in the gold futures markets?
> For one reason alone: what was once a means for producers and users
> to hedge an actual production process has become a casino. The big
> investment banks have “trading desks” who engage in speculation.
> There is one more important point to consider: the entire COMEX gold
> open interest (all open gold futures contracts) at the end of 2nd
> quarter 2008 amounted to about 425,000 contracts, each worth about
> $93,000.00. This totals some $39.5 Billion. In other words, JPM’s
> gold derivatives alone totaled more dollar value than all the gold
> available on COMEX. Two things are clear: JPM participates in more
> exchanges than just COMEX (and engages in more activities than just
> futures); and, JPM has the horsepower to manipulate this market to
> its own advantage. Why is this allowed? It appears that the gold
> futures exchanges are a casino and JPM is the “house”. Goodness only
> knows what a similar review of their activity in credit markets would
> reveal.
On Dec 30 01:13 PM jhm47 wrote:
> With Obama, Reid and Pelosi in virtual total control of our government,
> we are going to be in for at least four miserable years. I truly
> expect to see $10-$12 gasoline within the four years that Obama and
> his liberal leaders are in power. Food, and every other essential
> product will follow suit. Taxes will be raised to unheard of levels
> (there is already a scheme to raise the gas tax by $1.50).
>
> Buy land---learn to raise your own food, and have a means to protect
> yourself from those who are going to be hungry and desperate. <br/>
>
> Good God, I hope I'm wrong!!!
arabianmoney.net/2009/.../
All the mined silver on Earth is in use or has a predestined use. JPM's positions affect the market, whether by intent or due to genuine belief that precious metals are overvalued is irrelevant to me. I don't agree with their position.
More food for thought: Dollar coins minted 100+ years ago with .8 oz silver in them are only worth $12 today. Will anyone argue that something as rare and highly demanded as silver cannot keep up with inflation? There are way more straws easily sucking oil out of the earth and selling it for huge profits than there are mining companies turning a profit. Most miners are still sitting on huge gold reserves because market prices barely allow them to operate.
My blog explains what I think the best way to play silver is.
At the same time, if cynicism truly takes hold of us, we lose our ability to trust and can become overwhelmed.
I've tried to teach people to trust themselves while seeing the reality of the dangerousness of life.
G
On 2008 Dec 30 10:31 AM Kelly Lieberman wrote:
> The truth is that the entire US govt. has engaged in a conspiracy
> to prop up the dollar and in order to get away with it, has allowed
> alot of huge corporations to get in on the game. They believed in
> the trickle down theory and for awhile it worked as most of America
> ended up with a better standard of living than the generation before
> them.
> The problem is that the ruse is up. The lies are being exposed and
> it is not pretty. The rug has been snatched from under our feet
> and we are tripping over ourselves and each other before we are trampled.
>
> The world is a lot more dark and sinister than anyone wants to believe.
> Unfortunately, if you don't wake up and take action on behalf of
> yourself you will be more likely to be one of it's victims.
"“Thou shalt use every good idea thou comest upon" ?
Are you serious?
Try using ideas that actually make sense in your article.
JPM's open contracts mean little because most will be closed before contracts expire. And how much of JPM's holdings belong to its clients? Most, probably.
Speculation drives all markets. Most of the speculation is about supply and demand of a commodity or stock or bond, or whatever. But that speculation also factors in expectations for related markets such as the money and currency markets as well as for markets of competing products. That's why the precious metals markets interact much as the grains and live stock markets do.
It seems to me that the author of the opening post is unhappy that gold and silver aren't going up as much or as fast as they think they should, and he's come up with a conspiracy theory to rationalize his poorly timed trades.
Gold bulls have been spouting this kind of stuff for decades.
That governments and institutions trade commodities is no big deal. They've done it forever. Sometimes they make good trades and sometimes not. Same goes with banks and other institutions and commericials as well as individuals.
Trading gold or any commodity is a very risky business, and if you can't manage your losses you probably should be in money market funds, etc.
“Hedge funds dumping positions to raise cash are not the cause of the drop in price”
Ah, so when people sell bullion and futures it’s supposed to cause the price to go up? Last time I checked, higher supply and lower demand leads to lower prices.
“…long positions had to be liquidated due to the illegal short selling that is so easy under the US fascist regime.”
So this amazing power is both impotent and omnipotent? And since when is it illegal to short-sell a security? Are we trading gold in New York or stock in Melbourne or Shanghai?
“Plausible?”
If there was any failure to deliver gold and silver, it would be plausible. So far there has been none.
Remember: the price you pay per ounce for a very large bar of any metal (not just gold and silver) is typically lower than the price you may pay for a one-ounce minted round or bar. Aluminum foil at your local supermarket costs far more than 66¢ per pound. Is there a giant aluminum price suppression scheme afoot? Is this a plot by the Aluminiummati?
A prudent investor uses diversification, is studious, and assumes an unknown messenger as having bias. Gold and silver are merely tools of the prudent.
Hear at SeekingAlpha, the noteworth and insightful are praised and followed; the fools simply ignored.
Gues which group you belong to.....