How the Banks and Hedge Funds Manipulate the Precious Metals Markets

 

"If price discovery is compromised by manipulation, then we will all be gradually impoverished and the economy will be imbalanced and unstable.   Over the past 25 years the forces of regulatory liberalisation and demutualisation of markets have allowed the largest global banks to set the rules, processes and infrastructure of global markets to their own self-interested requirements."

London Banker, Lies, Damn Lies, and LIBOR 

 

"American political corruption was the buying up of legislatures and assemblies to keep them from doing the people's will and protecting the people's interests; it was the exploiter entrenching himself in power, it was financial autocracy undermining and destroying political democracy.   By the blindness and greed of ruling classes the people have been plunged into infinite misery.

It is difficult to get a man to understand something, when his salary depends on his not understanding it.” 

Upton Sinclair

 

"He who does not bellow the truth when he knows the truth makes himself the accomplice of liars and forgers."

Charles Peguy

 

When I write about 'running the stops' this is what I mean, as is explained in the video below.  They do it quite a bit in the metals markets, but also in the rest of them, including the bond markets.

There are commentators and sites that continue to excuse and cover up the corruption ongoing in the markets. 

You might be correct, given all the evidence, to be a bit skeptical if not suspicious of those professional scoffers, and the perennial promoters of unregulated 'free markets' in which powerful insiders have the ability to cheat and defraud the public at will.

The pity is that it still continues, along with quite a bit of additional antics and shenanigans.

Here is something I wrote back in 2009 about a particular event, which was called the Dr. Evil strategy by Citibank when the European regulators took them to task for running the stops in the European bond market. 

Ted Butler and many others have been doing good work citing and challenging this silver and gold market manipulation, for years.   Ted in particular has been writing the book on JPM and the silver market.

Bart Chilton passed away some years ago at age 58.   But Gary Gensler, his old boss, is now back again.   Will anything be done?

You can find the related pieces over time by clicking on the Dr. Evil topic here.

Here is Kyle Bass' opinion on the physical metals leverage in the Comex.  The video keeps getting taken down, but this copy remains.

And here is James Cramer's notorious description of how he manipulated the markets.

If you are trading with a online broker, do you notice how odd the price action has become when you place an order?

I do not seek to persuade you.  If you don't realize yet what is going on, it may be because you cannot.

I just feel an obligation to bring things like the video below into the light of day. 

Make up your own minds.

Or listen when the opinion molders say, 'nothing to see here move along,' and 'look look over there, people are trying to take your freedom by making you wear a mask.'

But if and when the physical markets blow up, as these highly leveraged schemes generally do, and no one could have seen it coming, and some outlandish rationale is advanced, you will know what happened, if you choose to see what has been there all along.

Stocks and Precious Metals Charts - Everybody Knows, But Who Could Have Seen It Coming?

"I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here.  If we are dealing with psychology, then the thermometers one uses to measure it have an effect.  I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market.

There's an interesting question here because if the gold price broke [lower] in that context, the thermometer would not be just a measuring tool.  It would basically affect the underlying psychology. Now, we don't have the legal right to sell gold but I'm just frankly curious about what people's views are on situations of this nature because something unusual is involved in policy here.  We're not just going through the standard policy where the money supply is expanding, the economy is expanding, and the Fed tightens. This is a wholly different thing." 

Alan Greenspan, Federal Reserve Minutes from May 18, 1993 

 

"We looked into the abyss if the gold price rose further.  A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.  Therefore at any price, at any cost, the central banks had to quell the gold price, manage it.  It was very difficult to get the gold price under control but we have now succeeded.  The US Fed was very active in getting the gold price down.  So was the U.K." 

Sir Eddie George, Governor Bank of England in conversation with Nicholas J. Morrell, of Lonmin Plc, 1999

 

"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness.  This report is produced for information purposes only." 

Statement at the bottom of the CME Gold and Silver warehouse inventory reports

 

"On January 30, 2012 the Wall Street Journal did a hilariously bad job of reporting when its front page article stated that a 'person close to the investigation' said that as a result of chaotic trading in the week before MF Global's October 31 bankruptcy, customers' money 'vaporized.'  Money doesn't vaporize...

The habitual filching of customers' funds -- even if the funds are later replaced -- goes way beyond sloppy bookkeeping.  It goes way beyond bad judgment.  Just because MF Global got away with it for a long time before it blew up in its face doesn't mean one can call it sloppy bookkeeping and have any reasonable person believe it."

Janet Tavakoli,  MF Global:  Crime, Comedy, and Cover-Up, February 28, 2012

 

"But there is a sort of  'Ok guys, you're mad, but how are you going to stop me' mentality at the top." 

Robert Johnson, Audacious Oligarchy

 

“If you shut up truth and bury it under the ground, it will but grow, and gather to itself such explosive power that the day it bursts through it will blow up everything in its way.” 

Émile Zola

 

I just thought these statements were an interesting reminder, and a modern truth to be relearned, bluntly and plainly stated. 

Promises and commitments these days are writ on the water of the fine print, and in the laws which the corporations have paid to have written. 

Who can say where and when the next Madoff moment will appear.

Gold and silver rallied strongly overnight.

Alas, they were hit in the London and NY trading, finishing slightly lower.

The Dollar drifted sideways, managing to hold a toe over the 91 handle.

Stocks soared today, taking back much of their recent losses, but still falling short of their recent highs.

Who could see it coming?

Risk on.

Have a pleasant evening.

 

Stocks and Precious Metals Charts - 'Pledged Gold' on the COMEX - Stock Option Expiration on Friday

"For those who have at times struggled to understand the difference between COMEX inventory categories ‘registered gold’ and ‘eligible gold’, now your head can spin even more, since the CME’s COMEX has just introduced a new category – ‘pledged gold’.

This pledged category was first noticed on the infamous COMEX warehouse late last week by Nick Laird of fame, with the pledged gold column intriguing populated with an entry next to the New York vault of bullion bank, HSBC. What did this pledged column entry mean, we wondered, and where did it come from?

After some digging on the CME website, the answer was revealed. Pledged is a new gold inventory category representing COMEX gold warrants which have been deposited with CME Clearing as performance bond collateral, in other words margin collateral. CME as follows:

'Performance Bonds, also known as margins, are deposits held at CME Clearing to ensure that clearing members can meet their obligations to their customers and to CME Clearing.'

COMEX registered gold stocks (those which are available for delivery) are currently only about 34 tonnes, a tiny foundation underpinning for a giant inverted paper pyramid. At the same time, COMEX gold futures contracts trade the equivalent of 27 million ounces per day (equivalent to 260,000 tonnes of gold per year) – more gold than has been mined in history, and over 86 times annual gold mining supply.

While the amount of pledged gold listed on the is still relatively tiny, covering 100 oz of gold held at HSBC’s vault under the HSBC Tower at 1 West 39th Street, SC 2 Level, in Manhattan, that could well change. It will therefore be well worth watching these COMEX reports in future to see if this Pledged gold category snowballs.

And if it does snowball, [it's starting, see today's report - Jesse] it will be even more important to remember that any COMEX gold warrants which are deposited as performance bond collateral with CME Clearing will move out of the Registered gold category, since the holder 'may not use these warrants to satisfy their delivery obligations.'"

Ronan Manly, New COMEX Pledged Gold – Shrinking the Pool of Registered Inventory


"At the end of the day, perhaps, the equity side of the U.S. external balance sheet should be understood not by thinking of the U.S. as a giant and very successful private equity fund that borrows to buy equity—but rather as one giant corporate tax dodge for U.S. based multinationals…

If you think I am exaggerating, I would encourage you to take a look at the IRS data on the location of U.S. corporate profits—and the location of the taxes that American firms pay abroad. U.S. firms are earning big profits in jurisdictions where they don’t pay tax, and small profits in jurisdictions where they do…and in the process, reducing their U.S. tax bill as well. That’s real exorbitant privilege."

Brad Setser, US External Balance Sheet: Big Borrower and Giant Corporate Tax Dodge

I saw the pledged gold category in the clearing report last week under HSBC. Since it was only one bar I did not bother mentioning it and wanted to see what it was all about.  I had out of town guests, my brother and sister in laws, that left on Sunday.  They are among my favorite people, and the antics of the Comex took second place to them.  We had a great time.

There are 237,554 ounces 'pledged' under HSBC on the Comex clearing report included below. The pledged gold does not show up in either the eligible or registered category totals which would be  concerning.  I am going to be reading up on this and any worthwhile commentary. 

Right now I am trying to determine what trading strategy to follow when these markets break, because they certainly look like they are approaching some kind of crossroads.  Stocks are in flag patterns along with gold.

And of course there a lot of geo-political things going on.  And plenty of theatrics, misdirection, and a lot of shameless lying and self-serving corruption.  I can imagine now why supposedly so few of the rich and powerful may be saved.  Well, let's look to ourselves first, and try not to join in.


There will be a stock market option expiration on Friday.

Have a pleasant evening.

Stocks and Precious Metal Charts - Slowdown in US Manufacturing Stuns the Markets - A Nation of Servants

"The trust of the innocent is the liar's most useful tool."

Stephen King, Needful Things


"The bully type, the false 'tough,' has been the first to break down under the actual fire of battle.  The quiet, the calm, the determined have made the best soldiers.  Why? Obviously the bully is insecure in himself— he blusters to muster his own courage."

Pearl S. Buck, What America Means to Me


"Narcissists damage and hurt but they do so offhandedly and naturally, as an afterthough. They are aware of what they are doing to others - but they do not care.”

Sam Vaknin, Malignant Self-Love


"We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men. It is not merely that at present the rule of naked force obtains almost everywhere. Probably that has always been the case. Where this age differs from those immediately preceding it is that a liberal intelligentsia is lacking. Bully-worship, under various disguises, has become a universal religion."

George Orwell


“Crowd-pleasers [demagogues] are generally brainless swine who can go out on a stage and whip their supporters into an orgiastic frenzy— then go back to the office and sell every one of the poor bastards down the tube for a nickel apiece.”

Hunter S. Thompson


The so-called paradox of freedom is the argument that freedom in the sense of absence of any constraining control must lead to very great restraint, since it makes the bully free to enslave the meek. The idea is, in a slightly different form, and with very different tendency, clearly expressed in Plato."

Karl Popper


"A confident, aggressive delivery style - often larded with jargon, clichés, and flowery phrases - makes up for the lack of substance and sincerity in their interactions with others ... they are masters of impression management; their insight into the psyche of others combined with a superficial - but convincing - verbal fluency allows them to change their personas skillfully as it suits the situation and their game plan.

The most debilitating characteristic of even the most well-behaved psychopath is the inability to form a workable team."

Paul Babiak and Robert Hare, Snakes in Suits

The end of quarter antics of Wall Street hit a brick wall this morning, when before the bell the ISM Manufacturing Index came in at 47.8%, which was quite a miss, and showed the early signs, not only of slowdown, but contraction. This also reinforced the Chicago PMI which came in with a shockingly low 47.1 on Monday.

And so stocks dumped and gold and silver rallied. The Dollar was marginally lower.

I would not count these jokers out just yet. We have some additional data coming out this week, especially the Non-Farm Payrolls and the ISM Services Index, which may serve to provide the wiseguys some additional courage in their market manipulation.

After all, 'manufacturing' is so much an old economy thing, and services are where we wish to be. A nation of servants ruled over by a few oligarchs and their enablers.

Have a pleasant evening.

Stocks and Precious Metals Charts - End of Quarter Boogie Woogie - Non-Farm Payrolls and Golden Week

"Price discovery is not a sexy function of markets, but it is critical to the efficient allocation of scarce capital and resources, and to the preservation of the long term wealth of investors and the economy as a whole.  If price discovery is compromised by manipulation, then we will all be gradually impoverished and the economy will be imbalanced and unstable.

Over the past 25 years the forces of regulatory liberalisation and demutualisation of markets have allowed the largest global banks to set the rules, processes and infrastructure of global markets to their own self-interested requirements."

London Banker, Lies, Damn Lies, and LIBOR


"Plus ça change, plus c'est la même chose."

Jean-Baptiste Alphonse Karr, Les Guêpes

Today was the end of the third quarter. As usual the paint was going on the tape again to make those end of quarter results look better, or at least less bad.

The big shorts in the gold and silver markets, primarily on the Comex, managed to continue the knockdown of the metals that began with the October option expiration last week. see the Dr Evil strategy for details about this.

'Golden Week', a seven day national holiday in China, begins on October 1. There markets are closed. This provides a good cover for the paper trading to be conducted without undue physical buying pressure. Although the rise and steady level of gold inventories in the Comex Hong Kong has been notable.

There was a huge amount of gold contracts changing hands on the Comex last Friday.   The big seller was customers at JPM and the house account at HSBC. I have included that clearing report below.

The big gold contract buyers were the house accounts at JPM, Goldman, Citi, and MacQuarie.  Presumably some of this was short covering.

I would imagine that the price smackdown today and the past few trading sessions will have knocked down the number of longs being held in both gold and silver.

The Dollar was up marginally, as were stocks, and the VIX drifted lower.

There will be a Non-Farm payrolls report on Friday.

I was closed out of the remaining trading position I had long gold in the opening minutes today, on a tight stop.  A good chunk of it went out on Friday.  I will be looking for a re-entry point.  Carefully.

My thoughts on the markets with regard to support and resistance levels are marked on the charts below.

Have a pleasant evening.

Stocks and Precious Metals Charts - The FOMC Punch and Judy Show - Non-Farm Payrolls Tomorrow

“The tyrant is a child of pride, who drinks from his sickening cup recklessness and vanity, until from his high flown crest he plummets headlong into the dust of hope."

Sophocles, Oedipus Rex


“So much for Caligula the Emperor; the rest of this history must deal with the Monster."

Suetonius, The Twelve Caesars

Stocks were digesting their recent gains today, while glorying in the weak economic data.

It was announced today that Trumpolini intends to nominate Herman Cain as a Fed governor.  This easily tops his most recent nomination of Stephen Moore, who was at least nominally qualified despite being a certified Art Laffer collaborating supply-sider.

Thank God Trump does not own a favorite horse.

Having this many knuckleheads managing the world's most powerful currency and providing significant regulatory oversight to the US economy may be unintentionally very good for gold.

This reminds us of the need for checks and balances, and oversight as a restraint on the abuses of authority.  While it is tempting to unleash the power of nearly unrestrained fiat money in order to solve short term problems, one must consider who might one day be wielding such dangerous, highly discretionary power.

Speaking of restraints on reckless behaviour, gold and silver were hit hard and early, but managed to recoup their losses and actually finish higher on the day.   They closed higher as did the Dollar.  One might have thought it was a furtive, early move by some towards safe havens.

Sooner or later a crash is coming, and it may be terrific.

Non-farm payrolls report tomorrow.

Have a pleasant evening.

The Trend Change In Central Bank Gold Reserves in 2008 That Few Have Noticed And Fewer Acted Upon

This excerpt below is from a blog which I published in 2013.   It is a theme that I have been striking since 2009 specifically.

The turn in central bank gold buying came in 2008, although the bullish case for gold for other reasons became pretty obvious in 2002.

The bottom in the gold price was marked when England sold its remaining physical gold, in the notorious 'Brown's Bottom.'

By 2009 the data made it completely clear that the world's central banks had turned from net sellers of gold bullion in order to control its price and had become net purchasers of physical gold for their own reserves. 

Demand has been led by 'the New Silk Road.'

I suspect this change was a reaction to the currency crisis in the emerging markets in the 1990s.   It was referred to as 'the Currency Wars' popularized in China and given little coverage here.

And of course there was the failure of the Washington Agreement, struck in 1999 to manage the gold price through planned central bank sales in order to support what some called Bretton Woods II and the exorbitant advantage of the perodollar.

Hardly anyone outside of a small community of analysts had noticed, and even fewer understood what it meant.

I include the older charts, and a recent tweet by analyst Luke Gromen that shows where the central banks are in their purchasing today.

Hint, they are still buying gold, physical gold, and in steady to increasing amounts such that the 'free float' of available physical gold for delivery is strikingly low compared to demand.

I suspect that silver will have a role to play, judging by the enormous silver hoard that JP Morgan has established, for customers unknown.

Nothing to see here. Just a bunch of conspiracy theories.  And dirty little secrets that we prefer to keep hidden.  Move along.

"Few people realize that around 2008 central banks turned from being net sellers of gold to net buyers, and began to accumulate gold reserves in a big way for the first time since the 1970's, when Nixon slammed shut the gold window.

This is based on what they report officially to the IMF. There is strong anecdotal evidence that the actual turn in buying occurred quite a few years earlier, and more in line with the rapid appreciation in price as selling declined.

First the selling slowed and the stealth buying began, particularly in Asia and the Mideast.

There was a sea change in the gold market as central banks scaled back on their strategy of supplying official gold to the bullion banks in order to keep the price down.

The bottom in the gold price occurred when Gordon Brown threw England's gold with a pre-announcement into the market in order to bail out any bullion banks that were caught flatfooted 'in the turn' in May of 1999. This was the first clear sign that change was in the wind.

The Big Turn occurred in 2007 when the western central banks capitulated, and realized that they must allow the price of gold to rise, or exhaust their own gold reserves in the process. The central bank change did not cause this, although it certainly reinforces the trend. It is a symptom of the great change and the first unmistakable manifestation of the currency war. Although astute observers could see this coming in the aftermath of the Asian currency crisis in the 1990's and the Russian default on the rouble.

Gold commentators who do not realize this significant dimension of what has occurred and account for it in their thinking have been simply left behind, lost in an outdated frame of reference. They do not see the forest for the trees."

"Gold is unique among assets, in that it is not issued by any government or central bank, which means that its value is not influenced by political decisions or the solvency of one institution or another."

Salvatore Rossi, Chief of the Central Bank of Italy, 30 Sept 2013