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12 responses to “Barclays Caught Red Handed Manipulating Gold”

  1. Keith,

    Your explanations are really clear and you will to teach is definitevely evident , thank you very much. I am still a bit confused about the action on April 2013 , according to some (http://news.sharpspixley.com/article/ross-norman-gold-crushed-by-400-tonnes-or-usd20-billion-of-selling-on-comex/159239/), it would have been 500 t of paper gold dumped , while according to you it is not the case (we should have seen it on the evolution of the basis if so): meaning that there was a sell of physical gold.

    Therefore 2 questions:

    1- According to you what was the repartition in the sell out , between futures and physical in April 2013 (is it a 50/50 for not having the basis to be modified ?)
    2- Is there any possibility that the process of the calculation of the basis is not precise enough and can be “fooled”, how is it calculated on a daily basis (how many calculations of the basis are done throughout the day ?)

    Thank you again anyway for all what your are doing to try to vulgarize these concepts , at least the average Joe as I am , is trying to follow what is going on , thanks again

  2. Please can you clarify for me. Must the naked short buy back the exact same contract he sold or can he buy any contract for the same period from a willing seller?
    For example in the case where the original contract buyer wants to take physical delivery.
    Must the short handle physical gold or can he hand over the second contract as fulfillment of his commitment on the original?

  3. Dr, Weiner:

    You mention in the above article that the price is $100 below where YOU think it should be from $1,300.

    On what basis do you make this analysis. How do you know what the “right” price is when the price is set by millions deciding to buy or not but or sell or not sell their gold at whatever price is currently quoted. Why not say gold can trade at $1,200 or $500?

  4. When you can print all the money you need then the game changes.

    When you control the major players in a market AND can print all the money you need the game does not resemble anything like what most people see.

    When the price of ‘whatever’ commodity is not the ultimate goal but the price is only one of the controlling factors to your goal then profits and losses have a interesting meaning.

    The ‘cabal’ only cares about the price of ‘gold’ because of the market perception.

    The PM market is only a very small segment of the financial dealings by the cabal. The perception is a far greater influence to the cabal’s desired goal.

  5. Thanks for the thoughtful comments and questions.

    Rueffallais: I did a forensic analysis of Apr 12-15, 2013. The article is in the archives, just scroll back through the site. If you can’t find it, let me know by email or web form.

    blowforhome: I generally don’t get into the discussion of motives and the like, but I think they have been resistant to any form of audit. Look at the Ron Paul movement to audit them.

    Derek: Futures contracts are fungible. If you are long, you can sell a contract to any buyer. If you are short, you can buy a contract from any seller. The exchange matches up buyers and sellers, and they have an algorithm that decides when to add new contracts or retire existing ones.

    johnchew: I say it on the basis of… the basis. :) OK, all joking aside, there is boilerplate in each weekly report saying “We are interested in the changing equilibrium created when some market participants are accumulating hoards and others are dishoarding.” Right now, in gold, speculators have sold it down a bit.

  6. @Derek: Many of the existing futures clearing firms: TD Ameritrade/Thinkorswim, Interactive Brokers, Tradestation, etc. available for individual traders will not settle commodities for delivery. What they usually do if you do not roll your open futures position upon expiration, they will liquidate the contract for the cash value of the contract at expiration. So, for example, if you sold June 2014 gold at $1350 and it settles at expiry at $1250, then the broker will liquidate that open short contract and apply the credit to your account the margin requirement plus the $100 per contract profit (which is likely settled in cash every day any way. Each day your account is up or down based upon daily settlement, the account is going to be adjusted in cash.) I believe less than 3% of PM futures are delivered.

  7. Keith, I’ve followed you for awhile, but as of today you’re off my favorites list and I won’t be coming back.

    I’m sorry it has to be this way, but we approach unsettled times, times for people to take sides.

    One of the biggest obstacles that people have is recognizing manipulation and fraud.

    I think your heart is in the right place, but your head is in the sand. Best of luck.

  8. I think the reason people get frustrated with this analysis is in the difference between the futures market and the the spot price. After reading for some time now, I really don’t get it either. Perhaps an explanation of how the spot price is formed out of the futures market would help.

    What the average individual investor sees is the spot price moving around, just like a stock price. And what they can clearly see are moments (usually in the middle of the night) when price drops straight down. Reading some of the sources out there, we hear that someone dumped a quarter billion or half a billion dollars worth of gold contracts on the market all at once, which jams the price down.

    Whether or not they are successful is another matter, but nobody with a very large amount of money to trade just dumps it all at once for fear of moving the market and getting a bad deal on the purchase or sale. So, the conclusion most people come to is manipulation.

    You can see it with your own eyes on the chart. A sudden drop straight down, sometimes with a market halt, usually in the middle of the night and near points of support or resistance on the chart, and the seller clearly doesn’t get the best price for his money. If it looks like a duck and it quacks like a duck…might be a duck.

    1. prattner: The spot price is not formed out of the futures price. They are different markets. The only connection is arbitrage. That is, one can buy spot and sell future, or one can sell spot and buy future.

      One of the challenges is to step outside one’s own shoes for a moment. Most, if not all, of the people who read and write gold commentary on the Internet are price takers. That is, you have 10 Eagles you need to sell. Or you got a bonus and you can buy. This is the position of a price taker. The market bids on your gold at X, and you can take it or leave it. The market offers to sell you gold at X+Y, again take it or leave it.

      It may seem like a COMEX event can push the price in the wrong direction just before you go to buy or sell. (By the way, the middle of the night in the US is daytime in Europe and/or Asia). But that is only because the markets are connected by the two arbitrages I just outlined.

      If someone were to naked-short a mass quantity of paper, it would drive down the price of the futures contract. Then the future would be priced below spot by a large amount.

      This simply has not happened.

      And, at contract expiry, they would have to roll that massive short position. The behavior of the expiring month would be opposite to what it is, which is what I discus in this article.

      1. Shows how much I know :) But as an official member of the unwashed public, I can tell you that tons of people think that massive, sudden shorting is exactly what’s happening.

        And why not? If those sudden, straight down plunges you see painted on the chart so frequently are not shorting, what are they? Bid withdrawal? Regular old long sales?

        It is hard to believe that someone holding thousands of long contracts would just say to themselves, You know, selling these contracts little by little can take all day and is SO tedious. If I just enter 2000 and hit sell, I can sneak out of the office early and beat the traffic home. Who gives two shakes if the client loses a couple million? They got so much they won’t even notice. And it ain’t my money!”

  9. Keith, your comments are always insightful and explain very complicated issues in bite size morsels. I agree Barclays is not the smoking gun for large gold manipulation. They are the punk kid who smoked in the back room, maybe left ashes on the floor, but not the arsonist :). But two thoughts why this doesn’t mean there is not an arsonist:

    – Your chart showing slight backwardation as contracts expire does not mean there are still not massive naked short sellers who pushed gold down in sharp spikes to rattle the markets, and now must continually roll their contracts forward. It just means there are NET more buyers. The market was rattled lower, but the buyers still showed up after the drops, they don’t want to take delivery, and must sell their expiring contracts causing the slight backwardation, then rebuy. You might ask where is all the buyer’s money coming from? What about that $4B the Fed created? A lot has found its way into speculation on the stock and real estate markets (there’s no opposing force rattling those markets lower so they have risen). Why not the gold market? You might ask why is the balance between buyers and sellers so precise to cause only slight backwardation? I don’t know. Some force would need to be balancing it. But that means it is also highly unstable. You might ask why is the total number of contracts nowhere near high enough to cause this? This brings me to my second point.

    – As dolph9 so bluntly hinted at above: Using evidence derived from numbers that may be manipulated as proof there is no manipulation is not valid. If the manipulators are powerful enough, and there are certainly culprits who are, they could have manipulated the numbers not only to produce the effect they want but to show no manipulation. How do we know the official contracts on the books are all there are? Various parties could have officially closed them but maintain the balances on their own internal financial records off the official books. It’s like the tapering the Fed is supposedly doing – which appears to be not as well hidden: They say $45B/mo and falling. But in the last 3 months someone sold +$100B in treasuries. Belgium mysteriously got the money to buy them (cough from the Fed), the treasuries showed up in Belgium’s account outside normal channels, and the Fed balance mysteriously went up the same amount in misc/undefined line items. Fed tapering in the last 3 month appears to have actually been +100B/mo. Maybe this post makes me a conspiracy theorist. I’ll take off my tin foil hat now :).

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