Max Keiser and Mark O'Byrne Discuss the Gold and Silver Markets

"The tyranny of a prince in an oligarchy is not so dangerous to the public welfare as the apathy of the citizens in a democracy."

Montesquieu

I do not see the NSA involvement which Max mentions.  It does not seem to be necessary if you have big market principals and insiders involved, able to operate in secret with the acquiescence of the regulatory bodies and exchanges.   And if there is a need to obtain more specific information, the industry dominant Bloomberg terminal offer a wealth of information about how and when it is being used.

I do think there is serious fraud and abusive market rigging going on, as we have seen in LIBOR, energy, ISDA spreads,  advance selling and leaking of key economic data, insider trading, Bernie Madoff, MF Global, the London Whale, and now currency markets.

There is a general disregard for the rule of law when it is overruled by 'expediency.'   And the threshold for overruling it has gotten lower and lower, to whenever it is of benefit to one's friends and associates, rather than isolated to key issues of national interest. That is a corrosive condition.    It is crony capitalism, and it is destructive of real economic productivity and of markets.

It is ironic that the freest exchanges of information on some of these market abuses are occurring in Asia, and in governments that have made much less pretense to transparency and freedom of information than the US and UK.  They see what is coming and are making it easier for their people to protect themselves.  This is because they are not beholden to the Anglo-American banking cartel.

I am sure that the Congressional hearings that would follow the 'failure to deliver' of a major bullion bank or exchange will be very impressive, full of faux anger and histrionics from outraged politicians.  But like the MF Global hearings, I would expect much noise and heat, little light, and no effective redress for those who have been harmed, 'bailed-in' if you will. 

I expect the whole thing, all the leverage, deception, and fraud to be swept under the rug, and the event attributed to the course of human events.  The madness of crowds, practically an act of God, like the rewriting of the CDO/Housing financial crisis.  It is the most likely outcome in a credibility trap.  And apathy just encourages greater and bolder excesses and abuses.  Greed and fraud are usually not self-limiting, but self-reinforcing. If it worked once it will work again, so keep expanding.  Nothing is sacred.

Here is a reminder of the fundamentals.

Gold Is At Imporant Intermediate Term Resistance - Long Term GATA Has It Right

After the spectacular rally of last Friday it is natural for gold to pause and consolidate here.

However, I wanted to make sure you could see the position of the gold price with regard to the intermediate trend.

This is the key resistance which I referred to last week, clearly visible in the chart below.

The hedge funds were leaning very hard on the short side as we had shown in some of the indicators, and as several others had shown in the market structure through the Commitments of Traders Reports. And the bears had 'gotten smoked' by the commercials who hit them with a stiff short squeeze last week. As Ted Butler remarked, 'manipulation goes both ways.' Yes it does, but not in this case, because Ted does not understand even yet it appears the basic underlying reality of the long term gold market, perhaps because he is so focused on silver.

I think that the downward pressure, or bearish manipulation if you will, was greatly exaggerated by the trading desks because of the key market dates including option expiration. The ferocity of the rally was due to that pressure being relieved and turned back. It perhaps then could be better described as 'the end to the manipulation' than an active manipulation itself.

The rounded bottom showed how resolutely the bears had pressed on support, and how equally resolute the market was in holding its ground. If you coil a spring long enough, eventually it may snap back.

Now we see how the physical delivery situation plays out in June and July and if gold can finally break the downtrend. As I said, I do not think that the next leg up may have such an easy time of it because the foundation of the market manipulation is to suppress the gold price for the sake of a macroeconomic policy being put forward by the central banks.

As several commentators have pointed out, Kosares, Coxe and even my lowly self among them, the great trend change in the central bank attitudes towards gold which had driven the twenty year bear market with their organized selling has changed.  Central banks are now net buyers of gold.  It was their change in selling that marked the first turn in the market in 2000.  And now that they are buying we may see the next turn, until the market clears, or until they try to reinstitute a gold standard and fix the price at whatever valuation they believe they can sustain without provoking a 'black market' assault on their authority.

Make no mistake, they are still fighting the rally in gold every step of the way, not so that they can stop it, but because they want to control it, make sure it is 'orderly.' This is the underlying fundamental message of the market, and you will not find it in the Commitments of Traders reports. But you will find it in the kind of analysis and information being promoted by GATA for example.  For the last fifteen years they are the only group, as far as I can see, who have 'gotten it right.'

And it is not clear to me at all that a number of gold commentators get this fundamental fact yet. At some point they will, they will all get it. But not until the price of gold is much higher. But they may benefit from this market fundamental without realizing why, when the reversion to the long term trend occurs, and perhaps with a vengeance. And so they can ride the coattails of those who do get it, and occasionally try to appear 'wise' and curry favor with the popular financial media with dismissive and even snide remarks.

There are great events at work in the global financial markets. Only those who truly understand them will have the ability to profit in the longer term, because they will not be buffeted by the slick campaigns and the jawboning of the Anglo-American financial establishment which has been using the creation and distribution of fiat dollars as their personal piggybank for far too long.

Chris Powell Answers Doug Casey's Questions About Gold Manipulation

I had read Casey's piece, but quickly lost interest in it at the argument that the gold market is so big it cannot be manipulated by the poor weak central banks and their surrounding commercial banks who are practically bankrupt.

If someone is a value sophisticate in a segment of the market, but does not understand and have concern for the power of the Federal Reserve and its associated banks being able to print money at will, then it is probably good advice to stick what you do know, and leave the economics for someone else. The saying that control of the money supply is a powerful tool has been around so long that it has become proverbial.

As for the size of the gold market, it is tiny relative to the financial markets. Consider the enormous size of the international currency markets. Or the bond markets. Do the central banks manipulate them? Did Citi not get caught blatantly shoving Euro bond prices around a few year ago? Of course they did. And as the sanctioned trader protested, it was nothing out of the ordinary. They just don't get caught at it unless they get clumsy.

Prices in a market are set at the margin or 'on the float' in the day to day trade. All a large trader or group of traders has to do is manage that marginal trade and the market will follow. If one looks at the amount of daily trading done on the LBMA in daily volume relative to the amount of physical gold changing hands, the answer is fairly glaring.

Market operators may not be able to resist the primary trend, but given deep enough pockets and high enough leverage, and cooperation from like minded manipulators, and they can make a good game of it for quite a long time. That is an old and familiar story for those who know the history of the markets.

As for the why of the manipulation there are many reasons. But as just one example, if I and a group of associates could knowingly push the bullion price around in the short term, we could make enough money skinning speculators in the ancillary markets, derivatives such as options and in mining stocks for example, to make it a very lucrative trade. This is Markets 201.

All that is required is that the regulators turn a blind eye to the manipulation in the markets. And if anyone close to the markets still doubts that they do that today after all that has happened, you will excuse me if I don't take them very seriously. The big trading desks have been using the markets like their personal ATMs, and every time they do get caught in some slip up it is a slap on the wrist and a nominal fine, and a promise not to do it again.

Has this fellow ever read anything from Ted Butler or Harvey Organ or Bart Chilton?

Forget gold for a moment, what about silver?  Is that market too big to manipulate? How about the energy markets in the US? Remember Enron?

Academics like Paul Krugman might not readily understand this, because this is not what they do, and they tend to approach the world through simplified, abstract models that are without the dark alleys and rough edges of the real world. 

The notion that markets cannot be manipulated are a corollary to the efficient market hypothesis, and idealized markets that naturally tend to stable clearing prices.

But I would expect someone who considers themselves a seasoned speculator and market savvy to know that markets do not behave in this manner, and that as long as there are markets, there will be those who will bend the rules and cheat whenever and wherever they can.

The Wall Street demimonde does not care if the markets are corrupt because if you get enough information to see the 'bezzle you can make money on the swings, or if not by trading then by serving the interests of the trading desks of the large funds.  But market distortions can play hell with investors, and is destructive of the real economy because of the malinvestment that long term market distortion cultivates.

I don't like to dwell on the manipulation when investing as opposed to speculating.  As I have repeatedly said here, take your investment positions based on logic and the fundamentals, and a long term financial portfolio plan, and ignore the short term noise and wiggles.  Thinking back I have always made the most, if not all the profits on balance,  when I took a solid position and then just rode it, sometimes for years.   So if I were in the game of mining stocks I would not want to see people distracted from them IF they were in it for the long term and they were properly fit in a portfolio. And so I understand why some people get frustrated by talk of market manipulation.

Chris Powell makes a good show of answering these sorts of things, but I do not think that the effort here will be worthwhile. Anyone who can trot out the canard that a 'market is too big to be manipulated' does not engage my interest for very long.   All will be revealed in time whether we argue about it or not. 

But the real economy is in dire need of serious and meaningful financial reform, which includes cleaning up the markets and taking the pampered princes off the malinvestment feedbag.  And that is something that matters greatly.

"In an essay posted Thursday at GoldSeek, financial writer Doug Casey of Casey Research asks for evidence of gold market manipulation and some explanation of its purpose. Casey's essay is headlined "Precious Metals Market Manipulation?" and it's posted here.

The evidence and explanation have long been posted in the "Documentation" file at GATA's Internet site here.

Maybe the most comprehensive treatment of the subject is the latest version of your secretary/treasurer's "stump speech" here.

But we're always adding to the "Documentation" file, like the acknowledgment by the late Dutch central banker and Bank for International Settlements President Jelle Zijlstra that Western central banks rig the gold market show here, so if he's at all curious Casey might want to drop by occasionally for updates."

CFTC Commissioner Raises Alarm Over Silver Market Manipulation

The manipulation in the silver market with two or three banks holding enormous undeliverable short positions was obvious, for years.

The CFTC was complicit in turning a blind eye to this, stonewalling and whitewashing the corruption, as were many market commentators and participants. Ted Butler and GATA did a wonderful job of highlighting this enormous fraud but were ignored and even vilified for the past twelve years in the same vein as whistle blower Harry Markopolos was in raising concerns about Madoff's investment scheme.

Bart Chilton is speaking out as he said a few weeks ago he would if the CFTC was not making progress in correct this travesty. This is the sort of reform that the people were seeking when they swept the Democrats into office, a reform which they never received.

This obviously should be investigated by an independent body, given the regulatory capture held by the banks who manipulated the market to the detriment of the world in suppressing prices and creating an artificial shortage that will be painful to unwind.

This is not a partisan issue, but involves politicians of both parties going back twenty years or more, in both London and New York. And the corruption is pervasive and ongoing in multiple US finanical and commodity markets.  The regulators and ratings agencies have not been doing their jobs.

Some will attempt to dismiss what Mr. Chilton is saying here as inconclusive. Keep in mind that he is a high profile CFTC official, and what he says comes through a 50,000 watt megaphone, so he must choose his words with great care. But this is almost unprecedented for an official to speak out against his own administration.

The response to these sorts of revelations seem to be a blanket of media silence and whispered character assassination, which is the mark in trade of those who have no sense of duty, honor, and country. Their crime is betrayal of the public trust, and the public's fault is apathetic complicity.  'Silver did not rally on the news, it must not be significant. I did not hear about this on television, so it must not be true.'

But the dominos are starting to fall, and more revelations are to come. 

CFTC's Chilton raises alarm about silver market
WASHINGTON
Tue Oct 26, 2010 9:30am EDT

Oct 26 (Reuters) - There have been repeated attempts to influence prices in silver markets, Bart Chilton, a commissioner at the U.S. futures regulator, said on Tuesday.

"There have been fraudulent efforts to persuade and deviously control that price," Chilton said in prepared remarks before a Commodity Futures Trading Commission meeting.

Chilton said he could not pre-judge the outcome of the CFTC's ongoing investigation of the silver markets, but said public deserves some answers to their concerns.

Gold and silver are no bubbles. It is a reverse Ponzi scheme that goes back for decades, that has sold many more ounces of metal than can possibly be delivered at today's artificially low prices, that was tolerated and even promoted by those who were running a monetary control fraud, quite probably the greatest in history. The banks and insiders are trapped and desperate, trying to bluff and buy themselves out of another fraud yet again. They will never give up, but will have to be rooted out. It is unlikely that reform can come from within, since the righteous anger of the people and the will to change will be co-opted by those very forces that have manipulated the system and perpetrated the fraud.

Fortunes will be made and lost, and careers ruined, as the revelations of manipulation and corruption are made over the next ten years. And this will make for dangerous times, as an empire of deceit collapses not at once, but in stages. There will be new threats and more bailouts for the banks to be paid by 'austerity' for the common person who is caught up in their own web of petty diversions, apathetic cynicism and denial. There is little better example of this than Britain but America is not far behind.

But the tide has turned and change is in the wind.

Banks short 20,000 tonnes of gold.

Embry: Commercial Signal Failure in the Metals May Be Imminent

"A single breaker may recede; but the tide is evidently coming in."
Thomas B. Macaulay