Gold Market Manipulation is a Myth

Discussion of the Gold portion of the Permanent Portfolio

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technovelist
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Re: Gold Market Manipulation is a Myth

Post by technovelist » Wed Nov 12, 2014 3:19 pm

mortalpawn wrote: For those of you who believe gold market manipulation does not exist - UBS (formerly Swiss bank) agreed to settle allegations over its gold trading today:
UBS is to settle allegations of misconduct at its precious metals trading business alongside a planned agreement between UK and US authorities and seven banks over accusations of foreign exchange market rigging.
  http://www.ft.com/intl/cms/s/0/428e1400 ... z3IjBbG2yp

Other banks are also expected to settle soon - as multiple countries have investigations ongoing in the precious metals markets.
Yet, the so called conspiracy ‘theories’ are being proven to be real conspiracies by banks.
  http://www.marketoracle.co.uk/Article48138.html

So yes, in addition to manipulating the Libor rates (which several were already convicted of), banks are apparently also doing at least some rigging in precious metal and FOREX markets.
Why are you repeating these conspiracy theories?
Oh, because they are facts rather than theories. How rude of anyone to point that out!  :P
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Re: Gold Market Manipulation is a Myth

Post by mortalpawn » Wed Nov 12, 2014 7:16 pm

technovelist wrote: Why are you repeating these conspiracy theories?
Sorry - did not mean to muddy up the discussion with the presentation of facts.  UBS is just one of many - but today we hear from Swiss Government regulators:
Switzerland's financial watchdog said on Wednesday it had found a "clear attempt" to manipulate precious metals price benchmarks during a cross-market investigation into trading at UBS bank.
  http://www.reuters.com/article/2014/11/ ... Z420141112

These stories are on mainstream media now (Businessweek, Reuters, etc...) and not just the "gold bug" and "tinfoil hat" web sites.
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Re: Gold Market Manipulation is a Myth

Post by MachineGhost » Wed Nov 12, 2014 8:15 pm

technovelist wrote: Oh, because they are facts rather than theories. How rude of anyone to point that out!  :P
:o
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Re: Gold Market Manipulation is a Myth

Post by Jan Van » Thu Nov 13, 2014 10:45 am

Well, now that they have to pay up these large sums of money, I'm sure they are really scared and will never do it again! problem solved!
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Re: Gold Market Manipulation is a Myth

Post by craigr » Fri Nov 14, 2014 4:02 pm

Short-term, market manipulation could happen. But long-term there is no way to keep the water from spilling over the dam if it wants. The people thinking they have market X under their thumb are fooling themselves just as much as others trying to trade against them.

The key point from the blog post is this:
...I don’t follow the gold manipulation arguments. Sure it could happen and if you are short-term trading you can get caught up in that kind of activity. But for a long-term buyer of gold (or stocks, bonds, etc.) market manipulation risk is of no concern because you aren’t out there trying to trade against those guys. In the situation of gold, if there were a major global currency crisis, or even a currency crisis in the U.S. dollar, there is nobody on this planet that is going to be able to keep the price under control. It just isn’t possible. There will be too many people running for the exits.
I think this is where a lot of traders get burned. If you are short-term trading any asset (gold, stocks, bonds, etc.) you are in the wolf's den. If you are a long-term investor, who is not trying to beat the market, the chances of you getting burned by price manipulation is extremely low. Just don't play the trading game and you won't get burned by other traders.
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Re: Gold Market Manipulation is a Myth

Post by Gosso » Fri Nov 14, 2014 4:53 pm

I was just reading through Jesse Livermore's Reminiscences of a Stock Operator and came across this passage, which made me think of all the claims of market manipualtion in the gold market:
Reminiscences of a Stock Operator wrote:As I have said a thousand times, no manipulation can put stocks down and keep them down. There is nothing mysterious about this. The reason is plain to everybody who will take the trouble to think about it half a minute. Suppose an operator raided a stock that is, put the price down to a level below its real value what would inevitably happen? Why, the raider would at once be up against the best kind of inside buying. The people who know what a stock is worth will always buy it when it is selling at bargain prices. If the insiders are not able to buy, it will be because general conditions are against their free command of their own resources, and such conditions are not bull conditions. When people speak about raids the inference is that the raids are unjustified; almost criminal. But selling a stock down to a price much below what it is worth is mighty dangerous business. It is well to bear in mind that a raided stock that fails to rally is not getting much inside buying and where there is a raid that is, unjustified short selling there is usually apt to be inside buying; and when there is that, the price does not stay down. I should say that in ninety-nine cases out of a hundred, so-called raids are really legitimate declines, accelerated at times but not primarily caused by the operations of a professional trader, however big a line he may be able to swing.
If Jesse Livermore and Craigr agree then that's good enough for me.  :)
Last edited by Gosso on Fri Nov 14, 2014 5:04 pm, edited 1 time in total.
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Re: Gold Market Manipulation is a Myth

Post by craigr » Sat Nov 15, 2014 3:05 pm

Gosso wrote: I was just reading through Jesse Livermore's Reminiscences of a Stock Operator and came across this passage, which made me think of all the claims of market manipualtion in the gold market:
Reminiscences of a Stock Operator wrote:As I have said a thousand times, no manipulation can put stocks down and keep them down. There is nothing mysterious about this. The reason is plain to everybody who will take the trouble to think about it half a minute. Suppose an operator raided a stock that is, put the price down to a level below its real value what would inevitably happen? Why, the raider would at once be up against the best kind of inside buying. The people who know what a stock is worth will always buy it when it is selling at bargain prices. If the insiders are not able to buy, it will be because general conditions are against their free command of their own resources, and such conditions are not bull conditions. When people speak about raids the inference is that the raids are unjustified; almost criminal. But selling a stock down to a price much below what it is worth is mighty dangerous business. It is well to bear in mind that a raided stock that fails to rally is not getting much inside buying and where there is a raid that is, unjustified short selling there is usually apt to be inside buying; and when there is that, the price does not stay down. I should say that in ninety-nine cases out of a hundred, so-called raids are really legitimate declines, accelerated at times but not primarily caused by the operations of a professional trader, however big a line he may be able to swing.
If Jesse Livermore and Craigr agree then that's good enough for me.  :)
That's a great book. Awesome find with that quote.

Nothing has changed since he wrote those words. If the markets want to move for/against an asset there is simply no person or organization on the planet that can stop it. The markets dwarf it all. Again I say that anyone thinking they have market X under control is fooling themselves just as they think they are fooling everyone else. It will all be under their control, until it isn't. Then they will get their throats cut just like anyone else playing the game.
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Re: Gold Market Manipulation is a Myth

Post by mortalpawn » Mon Nov 17, 2014 3:34 pm

  Read "Gold wars" - gold is not like other commodities, it is certainly nothing like the stock market in terms of liquidity, and unfortunately is subject to manipulation in the futures market by major banks and even central banks.  The banks would not be subject to prosecution and settlements if it was not going on.

  I agree that it cannot continue forever - witness the large disconnect now between declining prices and sharply increasing physical demand (paper vs physical gap) - which is outstripping both annual gold and silver production currently.  However, both the central banks and large banks have a vested interest in suppressing the price of gold to support their huge foreign exchange derivative positions (which dwarf the gold market in size) and Keynesian economic policies (low interest rates for more government borrowing).  They can do this relatively cheaply in the gold futures market compared to the losses they would sustain in FX, derivatives markets, high interest rates,  or a from loss of confidence event in the general economy.  So they can take some losses in the gold market to cover their larger, more profitable positions elsewhere.

I do believe the recent fall in gold is not due to widespread manipulation, but instead the rising dollar, since commodities are falling across the board.  However, the large rise we're seeing now in the dollar (if it continues) could cause real problems, as it is very bad for the foreign exchange carry trade, and is also deflationary (which the Keynesian central banks hate), and large moves in the dollar are also bad for FX derivatives (which is larger than the stock or bond market).  If the dollar rise continues, we may see serious troubled waters ahead - and gold will likely not be the loser in this case.

More likely the banks will try to contain the dollar price to protect the FX markets - which will bring gold back from its recent lows.
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Re: Gold Market Manipulation is a Myth

Post by mortalpawn » Thu Nov 20, 2014 1:43 pm

More hard evidence of large banks manipulating commodities -  this time from a US senate report naming JP Morgan, Goldman-Sachs and others:
  http://dealbook.nytimes.com/2014/11/19/ ... es-market/
  http://www.zerohedge.com/news/2014-11-2 ... live-heari
  http://www.bloomberg.com/news/2014-11-1 ... -says.html

Still a myth?
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Re: Gold Market Manipulation is a Myth

Post by pugchief » Thu Nov 20, 2014 3:25 pm

I was a Schwab sponsored seminar last night and the speaker was talking about how congress is concerned with the manipulation of the markets by high-frequency traders. I wanted to jump up and yell, "Really? What about Goldman Sachs and JP Morgan!"
"Congressmen should wear uniforms, you know, like NASCAR drivers, so we could identify their corporate sponsors."
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Re: Gold Market Manipulation is a Myth

Post by Gosso » Thu Nov 20, 2014 4:14 pm

mortalpawn wrote: More hard evidence of large banks manipulating commodities -  this time from a US senate report naming JP Morgan, Goldman-Sachs and others:
  http://dealbook.nytimes.com/2014/11/19/ ... es-market/
  http://www.zerohedge.com/news/2014-11-2 ... live-heari
  http://www.bloomberg.com/news/2014-11-1 ... -says.html

Still a myth?
Image

Seems like Goldman lost money on their "manipulation".  Maybe this is a false-flag operation?
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Re: Gold Market Manipulation is a Myth

Post by Gosso » Thu Nov 20, 2014 7:56 pm

Here's an article from Bloomberg regarding the aluminum merry-go-round:  http://www.bloombergview.com/articles/2 ... etty-silly

After reading that I was reminded of Hanlon's razor: "Never attribute to malice that which is adequately explained by stupidity."
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