Incurious Gold Manipulation Theorists 19 comments
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By Brad Zigler
Real-time Monetary Inflation (last 12 months): 3.9%
"The pot calling the kettle black." It's a timeworn rejoinder to another's accusation, and an expression I think of whenever my research leads me to The Gold Anti-Trust Action Committee (GATA). The committee—an organization with the self-avowed purpose to "advocate and undertake litigation against illegal collusion to control the price and supply of gold"—once lambasted me for my lack of intellectual curiosity.
My challenge to assertions of bank manipulation in the gold futures market prompted GATA secretary/treasurer Chris Powell to write: "That's what's so disappointing about [Zigler] and about so many others involved with the gold market—a determined and perhaps a bit nervous lack of curiosity."
This is a surprising conclusion when you consider the hard data that supported the contentions in my essay "Gold Manipulation Redux" and its predecessor "Has Gold Been Manipulated?". Indeed, it was intellectual curiosity that led me to conduct the research engendering that data in the first place.
Why bring this up now?
Just this: The Commodity Futures Trading Commission now disaggregates trader commitment data allowing the intellectually curious more insight into block positions within the gold market.
But how many adherents of the manipulation theory are willing to acknowledge that the data show money managers—speculative investment funds—rather than banks, really drive futures pricing?
Strength Of Money Manager Positions In COMEX Gold Futures
Money managers have adopted a historically lopsided stance in gold futures. Long positions held by these funds are 111 times the size of their short positions. Put another way, 99% of the futures positions held by funds are purchases.
In the past, GATA's officers and other market commentators have complained that such deep concentration on one side of the market constitutes prima facie evidence of manipulation.
Yet, we've heard nothing from GATA about this speculative muscle flexing. Who's incurious now?
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This article has 19 comments:
Perhaps when the second half of the IMF gold is sold we will have a clearer picture.
Conspiracy theories are perfectly safe so long as you don't have sex with them, or inhale them.
www.imf.org/external/n...
Umm, it is public knowledge that Alan Greenspan said this in an open session to Congress, is that a conspiracy theory? So DiggerUK, please take your nonsensical, illogical name-calling posts, dig a hole, and stick them there.
On Nov 03 03:18 PM frdm45 wrote:
"Central banks stand ready to lease gold in increasing quantities
should the price go up."
They can only lease what they have got.
They can also lease what they haven't got.
What they can't do is sell quantitatively eased gold, it doesn't exist, nor can it be created.
The only way you can take the price of gold down is by supply always being able to outstrip demand, as Mr. Greenspan pointed out in his 1966 article.
Supply, as any bug should know, is very limited for gold.
www.lewrockwell.com/no...
Thanks for your prompt and courteous response, but the manipulation arguments died the death today.
"Best not be cruel to the Gatagoons, they can't understand why the IMF selling half it's 400 tonnes to India hasn't manipulated the price of gold down."
On the contrary, because the gold has been sold as a biparty exchange (at a price of c. $1040 an ounce), there is no reason this would depress prices. Prices rose strongly today for a number of reasons, but mainly because of this news.
"What they can't do is sell quantitatively eased gold, it doesn't exist, nor can it be created."
Wrong - paper gold does not exist, you can sell as many futures as you desire, and then pray the counterparty does not demand physical delivery. So if you are a bullion bank "selling" gold to a money manager who doesn't want to actually hold the stuff, you can sell away to your heart's content.
As for the article itself, it's a bit stupid. Obviously, money managers tend to be more often long assets than short, cos like they get given money and, er, buy stuff with it. But the MMs should understand that by only going long via futures, they facilitate a system whereby they probably distort the supply side of the supply demand dynamic and most likely get a lower return as a consequence.
This CTFC data shows the incredible size and concentration of short PM positions in US banks.
cftc.gov/dea/bank/...
On Nov 03 03:50 PM DiggerUK wrote:
> The only way you can take the price of gold down is by supply always
> being able to outstrip demand
You're embarrassing yourself by displaying such little understanding of how the COMEX gold futures market works. Please do some basic research before digging yourself any deeper.
> ....but the manipulation arguments died the death today.
Only in one person's mind. This was an off-market sale.......
The conspiracy theorists argue, that since the London Gold Pool days of the 60's pog has been suppressed by CB selling of gold.
The sums do not add up, there has never been enough gold mined for the theory to stand.
Anyway the communist countries were providing all the gold that was needed for western CB's to sell on.
CB's lease gold mainly to earn a few bob, and facilitate international trade, not manipulate the price.
It has a transitory effect on the price, but that's all.
And after the best part of 50 years, if CB's were seriously over-leasing the secret would have come out by now.
If they have been over leasing then like all conspiracies it will come crashing down. Gold cannot be quantitatively eased into existence, much as you claim it can.
There is a world of difference between physical and paper gold. Paper gold has a third party risk, physical doesn't.
CB's and bullion banks are different entities anyway. They each have their own stack.
They also exist for different reasons. The bullion banks to smooth the path of international trade mainly, the CB's to regulate the states currency.
If a leasing arrangement is entered into by the CB it is just doing it's job of protecting the states currency. But it isn't selling the stack in the national vault, just allowing it to be used as collateral mainly.
As you can see from this link it is leased gold that is traded most, not physical.
www.ifsl.org.uk/output...
On Nov 03 06:17 PM DiggerUK wrote:
> @ Screwloose,
> There is a world of difference between physical and paper gold.
There certainly is.
> Paper gold has a third party risk, physical doesn't.
Correct so far - if held in your possession.
> CB's and bullion banks are different entities anyway. They each have
> their own stack.
Indeed they do.
> They also exist for different reasons. The bullion banks to smooth
> the path of international trade mainly, the CB's to regulate the
> states currency.
I like the "mainly..."
> If a leasing arrangement is entered into by the CB it is just doing
> it's job of protecting the states currency. But it isn't selling
> the stack in the national vault, just allowing it to be used as collateral
> mainly.
I fail to see how you can use something that you don't own as collateral against default..? [Although, in theory, you could use it to nominally back futures contracts - if you could be certain that nobody would stand for delivery....]
> As you can see from this link it is leased gold that is traded most,
> not physical.
If the leased gold is traded, as most was, then it's not being used as collateral. The leased gold was sold into the physical market to depress the price - the CBs didn't want it back, although they still carry it on their books [no audits] and get the miniscule lease rates from it. Research the "Gold carry trade" from the late 90s.
The trade in the lease is mainly for collateral, not collection of physical.
Once the trade that the leased gold was covering for has served it's purpose, then the lease arrangement ends. Much the same as when you hand back the keys to a property, or a car, you have rented.
As the collateral might only be needed for a few hours, so that someone in India gets paid off someone in Europe that's it. Lease the gold back out as quick as possible. Just like a car rental. Fast turnover = high profits.
Gold is after all the oldest international currency, it just has it's own "forex"
No time for me to pass comment on the 90's carry trade. But I seem to recall that 50 (?) tonnes of India's gold was taken as physical collateral for loans in 1990 (?) by the BOE if memory serves me correct. Now that is what I call drastic. And don't forget that history rhymes.
Late here. See you around.
It's screamingly obvious that central banks have the means, motive, and opportunity to try and manage the gold market. I've been long gold for a decade even though I generally agree with GATA's analysis. It hasn't always been easy, but I know that intervention eventually fails, sometimes spectacularly. And sure enough, the dyke has kept on springing new leaks.
suggesting manipulation. And, of course, they talk "conspiracy theory" -- like Republicans use
"liberal" as an all purpose, denigrative, dismissive label. When one of these people writes an article addressing all relevant information and data, I will take it seriously. Until then, I think the great majority of data indicates the world is indeed round and that that the price of gold is manipulated down by the obvious suspects.
And the best reason to continue responding to these lop-sided, intellectually limited or dishonest articles is that people newly interested in gold and
not yet conversant with all the facts can be fooled...or lead into pooled accounts or precious metal ETFs that dont have the real stuff. As Jim Sinclaire and others say, the battle of the vast fiat monopoly against gold is fierce and the outcome momentous. And read FOFOA to better understand various issues.
or
Of course there are a lot of long positions on gold now ... we're in a bull market for gold! And these long positions are held by many different money managers. What Mr. Zigler fails to mention is that a couple of US banks have held 25-30% naked short positions on the entire world's supply of silver and gold year after year! This is not only manipulative ... it is criminal.
That's the beauty of the internet - with a click of the mouse I get to read flip sides of every coin.
If I was interested in following only one side I would join a cult!
Thank You Internet !
Before 'crisis':
3 major US car makers (GM, Ford, Chrysler).
3 similar business models.
3 similar company performances.
After 'crisis':
2 major US car makers received bail-outs (GM, Chrysler).
2 major US car makers still went bankrupt (GM, Chrysler).
1 major US car maker doing 'well' (Ford).
Question:
What did Ford do differently than the others, that was so miraculous, that allowed them to 'prosper' in the midst of this crisis? Should they not have gone bankrupt also?
Investment banks (and now, with regulatory changeovers, commercial banks) in the US are the primary dealers of precious metals swaps and other OTC derivatives.
People look at the futures positions held by these banks and thinki that these represent the totality of the institutions' exposure.
But it ain't so.
The CFTC reports only the futures positions held by the banks. What you DON'T see in the reports are the cash and OTC derivatives positions that these futures offset. Those would be LONG exposures undertaken against customers.
Banks, as commercial entities, use futures to hedge residual exposures in other markets.
Money managers, on the other hand, hold only speculative positions. You see their entire exposure to precious metals in the CFTC reports.
On Nov 04 12:24 AM sweetspot wrote:
> "Money managers have adopted a historically lopsided stance in gold
> futures. Long positions held by these funds are 111 times the size
> of their short positions. Put another way, 99% of the futures positions
> held by funds are purchases."
>
> Of course there are a lot of long positions on gold now ... we're
> in a bull market for gold! And these long positions are held by many
> different money managers. What Mr. Zigler fails to mention is that
> a couple of US banks have held 25-30% naked short positions on the
> entire world's supply of silver and gold year after year! This is
> not only manipulative ... it is criminal.
DiggerUK sounds like an appropriate name. Perhaps you helped Gordon Brown dig the UK economy further into the ground by selling half the UK's Gold Reserves for peanuts? Sorry that's a slur on peanuts. They will still have a commodity value when fiat dollar bills and pound notes are used for wallpaper.
You and Mr Zigler need to wake up to the fact that Gold will become the standard again, by default.
On Nov 03 02:28 PM DiggerUK wrote:
> Best not be cruel to the Gatagoons, they can't understand why the
> IMF selling half it's 400 tonnes to India hasn't manipulated the
> price of gold down.
> Perhaps when the second half of the IMF gold is sold we will have
> a clearer picture.
> Conspiracy theories are perfectly safe so long as you don't have
> sex with them, or inhale them.
>
> www.imf.org/external/n...
It would be so easy to do - and it would forever silence the conspiracy theorists and put a solid floor under the USD - So I'm sure we can all look forward to this in the near future.
Imagine the chagrin of GATA and others as auditors settle up OTC accounts against physical and prove once and for all that no financial crimes have been committed.
With so much heat coming from Washington and from the critics of the COMEX and from recent actions of the global investment community, surely the conspiracy theory smashing audit is just weeks away ...
right ???