The Mechanics of Precious Metals Price Manipulation

When I used to spreadbet as well as trading shares, I believed that stock and commodity markets were free. Over time, the companies and commodities I had extensively researched and bought into, I learnt, to my detriment (on some trades) that the share price didn’t behave like it operated in a free market. At times they would rapidly increase and decrease in price, good news would send the price down and some companies just gave false information (RNS). After researching into stock price movements, how markets are operated and regulated, HFT’s, dark pools and insider trading I realised I’d been lied too. The game is rigged and I did not wish to be part of that market so I withdrew my capital. I did not want to trade short term on fallacies because there is always someone on the other side of the trade, someone like me but unaware the game is manipulated on a monumental scale. Courtesy of Silver-coin Investor:

Much confusion persists regarding the method, or mechanics, of how the big banks are able to push the price of precious metals around at will for so long.

GATA and Ted Butler have long established and outlined the reasons why this occurs (legally). They have also established the foundation that forms the basis of how the manipulation unfolds. Despite very clear and concise commentary, the message sometimes becomes diluted in its distribution. This situation makes for easy picking from the hard-core opposition who mainly reside, ironically, as part of the professional mining and trading community.

The confusion comes from declarations that on price drops, the bullion banks are selling. This then triggers the frequent and violent down-drafts we have witnessed over the last 2 years and counting. However, the trading data indicates the contrary. Commitment of Traders (COT) data shows that the big banks always buy on these dips and they always sell on rallies. Always. (This is clear evidence of manipulation in and of itself.)

So how do they get the price moving in one direction or another, usually to the downside?

The mechanism is made clear by the forensic analysts at NANEX, which provides documented real time price action down to the microsecond.

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Home CFTC Concludes Long-Running Silver Manipulation Investigation, Nothing to See Here

Well after hearing Andrew Maguire on the latest Keiser Report discussing the two JPM whistleblowers who corroborate that silver manipulation is very real and very fraudulent, the case has been closed. How can you have a 5 year investigation, provided with clear, complete information and testimony of said fraud and find nothing? You cannot, unless the commissioners of the CFTC are corrupt…courtesy of Reuters:

The U.S. Commodity Futures Trading Commission on Wednesday said it has closed its long-running investigation into complaints about manipulation in the silver markets, and is not recommending charges.

The CFTC publicly confirmed the probe in September 2008. At the time, the agency had received complaints about whether the silver futures contracts traded on the Commodity Exchange Inc (COMEX) were being manipulated.

“Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets,” the CFTC said in a statement.

This is Bart Chilton who was running the investigation, he’s part of the fraud against the people of the world. Disgusting behaviour, the crazies are well and truly in control of the asylum.

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“Hello HSBC, This Is JPMorgan – We Urgently Need Some Of Your Gold”

The smell of desperation is in the air…courtesy of Zerohedge:

What happens when 63.5K ounces of registered gold in your warehouse (16% of total) just has their warrants detached and the vault is about to finds itself 63.5k ounces of gold emptier? If you are JPM you call the gold vault with most inventory in town, that of HSBC, and politely request that they transfer as much eligible gold as they can on short notice – in this case a tiny 6,444.936 oz to be exact.

None of which changes the fact that in a few days, the inventory in JPM’s gold vault will drop to another record low of only 380K ounces and the JPM “rescue” pleas from HSBC and other Comex members will become ever louder and more desperate until one day they may just go straight to voicemail.

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JPM Eligible Gold Plummets By 66% In One Day To Just Over 1 Tonne

I’ve been blogging about the JPM COMEX vault for a while now as it’s at the epicentre of the Gold fraud. Last night it was reported in the Hedge that they have 1 tonne of eligible gold left in the vault, leaving a lot of empty space and millions of paper contracts backed by nothing. It’s feet up and popcorn time I thinks, could this be the beginning of the end for physical delivery on contracts or will there be more fraud a twist in the tale. I believe they will go the same way as ABM AMRON and Rabobank. They will settle contracts in cash but if the fund is meant to be backed by gold and there is no gold, then the fund has no intrinsic value and the market value of said fund will drop to zero. End game scenario anyone?

For over a month, JPMorgan managed to mysteriously avoid matching up the gold held in its (world’s largest) vault with the Comex delivery notice update. However, as of today, that particular can will be kicked no more. Starting yesterday, JPM reported that just under 12,000 ounces of Eligible gold (the same Registered gold that two days earlier saw its warrants detached and convert to eligible) were withdrawn from its warehouse 100 feet below CMP 1. But it was today’s move that was the kicker, as a whopping 90,311 ounces of eligible gold were withdrawn, accounting for a massive 66% of the firm’s entire inventory of non-Registered gold, and leaving a token 46K ounces, or a little over 1 tonne in JPM’s possession.

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Needless to say, today’s massive move which increasingly puts JPM’s gold holdings in the danger zone vis-a-vis future delivery notices which just refuse to stop, has pushed total JPM vault gold to a new all time low of just 436k ounces, or a little under 14k tonnes with just 12 tonnes, or 390k ounces, of Registered gold left and rapidly draining. And to think that two years ago around this time JPM had over 3 million ounces of gold in its possession.

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Finally, those who believe there is a connection between the ongoing run on JPM’s vault gold, the suppressed price of the metal, the redemption of Bundesbank gold, and the fact that 3M GOFO has now been negative for 10 straight days or the longest period in history it has been below zero, and indicating an unprecedented gold collateral shortage, you are correct.

Finally, putting it all in context, this is what 1 ton of gold looks like in the real world courtesy of Demonocracy:

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Paper Vs. Physical Gold: Picturing The COMEX/SGE Divide

Courtesy of The Real Asset Co:

Chinese gold demand, from both individuals and central banks, garnered increasing attention as the gold price rose consistently in the last twelve years. When the gold price declined, many in the West declared the end of gold, but China (along with many other Asian nations) defiantly continued to buy gold and increase their imports.

Questions over the legitimacy and transparency of COMEX and the London Gold markets are now becoming louder, especially as increasing numbers of institutions are keen to know what actually backs those contracts. ‘Paper gold’ is on everyone’s lips.

When it comes to the SGE, there seems to be little concern over the presence of physical gold, given the increasing volumes of activity in the three largest contracts, two of which are available for immediate delivery. Delivery ratios are significantly higher than those on COMEX, showing the far higher of physical participation in this market.

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Whilst the gold price is unlikely to be powered by the SGE, as long as the vast volumes of paper gold exist on both COMEX and London, we do believe that the SGE could end up driving the wedge between the paper gold and physical gold market, and therefore disparities in price between what market participants would deem two different products.

As The Real Asset Company notes, Physical gold demand in the most populated country on earth does not seem to be subsiding, yet neither do COMEX and futures volumes generally.

We believe that as increasing numbers of Westerners look to take delivery of their gold from Western exchanges, there will be more pressure on the physical market. China’s primary physical exchange, as we see from delivery data, is the liquidity hub with the best reputation for such demand.

However anecdotal and media reports show that this is an ongoing phenomenon. Unlike investors in the West, Chinese housewives just want physical gold regardless of the price. This is clearly evident in the delivery data on the SGE, unlike in the West where we see gold as an investment which we hope will climb in price, the Chinese see gold as a way to free up devalued cash and place it into a real store of value.

We are watching a fascinating battle play out between this army of Chinese retail buyers and the specs in the West. The future of the gold price is there for the taking.

JP Morgan Vault Gold Drops To New Record Low; Brinks Gold Plunges By 24% In One Day

The paper gold fraud continues, physical gold departs JP Morgans as well as the COMEX vault, a slow countdown to an event that will eventually change the worlds opinion on money for generations to come. Courtesy of the Hedge:

While we await the weekly CFTC commitment of traders report (delayed until Monday due to the July 4 holiday), we are happy to report that the JPM disconnect between the epic delivery requests and its reported gold holdings (for which the “Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness”) reconnected modestly, and as per the latest Comex update, another 6.8k ounces of gold was pulled from JPM’s 1 CMP world’s biggest gold vault, dropping its total gold inventory to a fresh record low.

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Perhaps even more notable is that on Friday, that “other” depository, Brink’s, saw 24% of its entire registered gold holdings, or 133k ounces, quietly get withdrawn. This, together with the moves in JPM and HSBC inventory, meant that total Comex gold holdings dropped by 116K ounces to a new low not seen for the first time since 2006.

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Finally, for that all important marginal source of paper gold supply or demand, ETFs,the two largest ones (GLD and IAU) have now retraced 50% of their “holdings” gain since the fall of Lehman.

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Someone more inquisitive than us may wonder: just where is all this gold being “withdrawn” to…

Gold Is Being Supplied By Western Governments

I look forward to the day when my neighbours think, if we live in a ‘free-market capitalist society’ how come so many markets are fixed and manipulated? I then look forward to them realising they don’t and demand change. Gold and silver is true money to me, our fiat debt based system will come tumbling down like the Ponzi scheme it is.

Adrian Douglas of GATA spoke about Gold manipulation back in 2011, before he passed, at the Gold conference and covering hypothecation very succinctly. The fraud is so in your face and brazen you have to laugh, I’m over my anger phase but when the majority begin to wake to this fraud…heads will roll.

This article is from Alasdair Macleod via GoldMoney blog, a quality article on who’s supplying the Gold to the markets. It’s not like the reserves are independently audited yearly so this would be put to bed, if that was the case the fraud would be uncovered.

There has been considerable throughput of gold in western capital markets, with substantial buying from all round the world following the April price crash. The supply can only have come from two sources: the general public, or one or more governments. It really is that simple. Two months later the gold price has only partially recovered, so physical supplies have continued to be made available. Physical demand cannot have been entirely satisfied by ETF liquidations, confirming governments are involved. This article looks at the dynamics of the gold market around this event and the implications.

While the investing public in the western nations has been generally stunned following the April price smash, demand from Asia is running at record levels, illustrated in the chart below, which is of physical gold deliveries on the Shanghai Gold Exchange. (Thanks due to @KoosJansen for pointing me to the data on the SGE’s Chinese website).

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The increase in deliveries for April and May was spectacular, totalling 460.5 tonnes, with the week ending 26 April alone seeing phenomenal deliveries of 117 tonnes. In addition, according to the Economic Times, India imported 142.5 tonnes in April and 162 tonnes in May, compared with an average monthly rate of 86 tonnes in Q1 2013. Therefore these two countries imported 765 tonnes of gold in two months, before considering any unofficial imports or their government purchases in foreign markets. The rest of Asia, from Turkey to Indonesia would certainly have stepped up their demand for gold as well, as did the western world itself for physical metal as opposed to paper entitlements.

The table below puts this into context.

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A prefatory note about the statistics in this table: there is no single defined source of statistics on gold movements, and there are considerable variations in the same numbers reported by different organisations. The figures in the table above can only illustrate bullion flows. I have sourced the statistics from official sources where possible. The cash-for-gold business has had the easy pickings by now, so an assumption that this is about 600 tonnes per annum is I believe cautiously over-generous. It is based on a speech made by Jeffrey Rhodes of INTL Commodities DMCC to the LBMA in 2010, when he identified scrap supply as 583 tonnes in North America and Europe, whose central banks are in the gold suppression business. At that time, 1,091 tonnes were recycled in the East, including Turkey. Since the Chinese, Russian and other gold-producing governments of Central Asia retain most if not all of their domestically mined gold amounting to over 700 tonnes, there is less than 2,000 tonnes of free mine supply annually available for global markets, based on US Geological Survey figures.

Looking at the bottom line for 2012, there were only 87 tonnes of gold supply for the rest-of-the-world, after Asian and Russian central bank and global ETF purchases. In other words, there must have been a severe deficit overall, which can only have been covered by central bank sales.

About 150 tonnes of ETF gold were liquidated in Q1, providing temporary relief until the Cypriot crisis, when concerns over the security of large deposits in eurozone banks prompted a flight into physical gold, but interestingly, not into ETFs. This was because there were escalating systemic concerns over having physical gold and currency deposits with European banks, while at the same time portfolio investors were worried that the 12-year bull market might have ended.

From the point of view of the western central banks, as well as the bullion banks with short positions on Comex, in March the alarm bells must have been ringing loudly. Chinese demand was accelerating and there was an increasing likelihood that ETF liquidation would cease if the gold price stabilised. If that happened, as the table above clearly shows, an epic bear-squeeze would likely develop, fuelling a rush into gold and potentially bankrupting many of the bullion banks short in the futures markets and/or offering unallocated accounts on a fractional reserve basis.

Therefore, investors had to be dissuaded from buying gold, otherwise the ensuing crisis would not only cause a market failure that could spread to other derivatives (particularly silver), but it would come at the worst possible time, given the coincidental programme of monetary expansion currently being undertaken by all the major central banks.

The reasons for governments to intervene on the side of the bullion banks were therefore compelling. As one would expect, the intervention was well-timed: on Friday 12 April two large sell orders of 100 and 300 tonnes were placed on Comex, clearly designed to do maximum damage to the price, and setting it up for all remaining stops to be taken out the following Monday. Furthermore, central banks were prepared to supply physical gold to keep the price from recovering. We know this because lower prices generated a surge in private demand, not only in China and India, but from everywhere. The only possible supply, other than inadequate ETF liquidation, is from governments.

India and China have absorbed enough gold in the last two months of April and May to leave the rest of the world in a supply deficit, requiring matching sales of western government gold to continue to suppress the price.

The future

We now know for certain that government-controlled gold has been used to defuse a developing crisis in gold markets that had the potential to destabilise bullion banks, other derivative markets and ultimately the whole fiat currency system. We have seen the surge in demand for physical gold, which is the consequence of sharply lower prices. Realistically, the priority has been to ensure such a crisis is avoided, rather than for the price of gold to be continually suppressed.

The difficulty for the casual observer is compounded by the available information being one-sided. We are all painfully aware of both the losses inflicted on investors and their loss of faith in gold at a time when other investment media, such as stocks and bonds, have been doing well. Concealed from us is the real financial condition of the banks and governments themselves, which is the fundamental reason for owning gold. We are acutely aware of the sellers’ pain and only dimly aware of the buyers’ motivation.

Nervous western investors in a market of 160,000 tonnes are in truth a small part of the whole, particularly since gold has been migrating from the west to the east where it has been more valued ever since the 1970s oil crisis. More fundamentally we know that the stock of gold grows at about 1½% annually in line with global population growth. We also know that central banks everywhere are expanding their balance sheets at an accelerating rate. The disparity between the rate of growth for gold and paper currencies will certainly lead to increased tensions between precious metals and currencies generally, and it is this that will drive future demand for gold, not whether or not western investors think it is in a bull or bear market.

A second point about the market being 160,000 tonnes and not just the sum of mine and scrap supply is that the market is far bigger than western governments’ gold reserves. Gold held by them is officially about 19,000 tonnes, but it may well be only half that, or 5% of the aboveground stock, when unrecorded leasing and selling over the last 25 years are taken into account. The ability of central banks to contain a global surge in gold demand such as that which followed the April price-crash and continuing to this day is therefore limited.

But this is only a part of the story. There are the factors concealed from us, such as the buying opportunity given to gold-friendly governments and sovereign wealth funds, both with surplus dollars, as well as the appetite for gold from the growing ranks of the Russian and Asian mega-rich. There are factors known to the financially savvy, such as the growing instability of the Indian rupee and other emerging market currencies, the increasing systemic risks in eurozone banks with the threat posed to deposits, and the revenue shortfalls that force governments to raise money by printing their currencies at an increasing pace: all will impact the gold market in coming months.

These and other systemic problems are deteriorating. A potentially destabilising crisis in the gold market from runaway prices has been defused by allowing the bullion banks the space to square their books. There can be no other realistic objective in supplying government-owned gold into the market. As to the embarrassment of the gold price rising at a time of accelerating money printing – that will have to be accepted, presumably emphasising the official line, that the gold price is irrelevant to a modern economy