20 May 2013

Gold and Silver Futures Hourly Charts - Sharks With Laser Beams

There is not much doubt in my mind that the antics we saw in the silver, and to a lesser extent gold, markets last night were a classic hit and run, Dr. Evil market play.

It is not particularly sophisticated, more like a brazen street con, or a smash and grab.  But it does require a complacent regulatory environment, and a certain regard for fellow insiders who are in a position to see what has happened and raise objections with regulators and the exchanges.

One hits a quiet market with a very large 'sell at market order' and runs the stop loss orders on long positions.  And also triggers margin selling by longs.  But given the four minute turnaround it looked more like stop loss busting.

As the sell orders and any associated selling abates, which is generally rather quickly, the trader quietly buys back contracts and gets long 'on the cheap,' and allows the market to run higher and book a profit.

The point of this is not to manipulate the price lower and keep it there. The objective is to take out long positions in a quiet period and put them in your own pocket at below market prices.

This is one of the classic market cons and one of the reasons why prior reforms had instituted the 'uptick rule' on short selling. That rule has been eliminated and the regulating of naked short selling is a bit of a joke.  It is also why some are asking for 'position limits,' but this plea is falling on highly compromised ears often numbed by the revolving door between politics and finance.

So what next. Gold and silver were at extreme oversold position in terms of sentiment, Comex registered gold ounces, and chart technicals. The usual price suppression scheme was not going to keep going with the huge amount of physical offtake in the markets working against it.

So the smart money started covering the 'ancillary shorts' in cross markets such as mining companies, and went long in anticipation of a forced bottom.

There could be another bout of steady price suppression once this oversold condition is worked off.  It really depends on what had triggered this long effort to push the prices lower despite rising physical demand. 

Today Goldman Sachs says it sees 'more downside.'  You may recall that it was a 'short gold' call by Goldman that started this downside ball rolling through support some time ago.

Last night there were some related shenanigans in the Yen trade, but certainly did NOT look like a panic sell off by legitimate metal longs, although I am sure it will be portrayed that way by some. And I doubt it was a margin call either, except as the price plunged from calculated selling.

Although I would certainly appreciate any hard evidence that the CFTC could offer on this. In a better world we would not have to guess at how the prices of key commodities are being set, and shoved around the plate by those scavengers who are not involved in the real world process of demand and production.

That Banks who are on an ongoing public subsidy, and utilizing depositor funds, in order to game the markets and disrupt the real economy for their own profits is almost beyond belief, unless you have a knowledge of the history of central banking in the US.

And if they have a hand in implementing official financial policy for the Fed/Treasury, it would be understandable why they are untouchable when they engage in extracurricular activities like the market operation last night.  Or the coming moves in the equity market that could 'blow your mind,' as we used to say.  All these fellows know is 'more.'

Most of the discussion has been on the gold market, but I continue to think that the real chronic problem in the metals market is arising from the silver market where there is a real fear of a delivery default, or an uncoverable short position by a TBTF.

But in general this looks like another sign of the pathological environment on Wall Street and in Washington. 

In the target period only the NY Globex Market is open and volume is very light.