Increasingly Blatent Attempts to Suppress Gold Prices Are Evidence Of Desperation

Here are two graphics from Kitco's 24-hour Gold Spot Chart, one from Monday and the other from today.


Today's 24 hour gold chart:

(Notice three separate spikes in selling in the last 48 hours, all occurring at the end of Hong Kong trading session. Notice that two of these selling spike happen right at the open of the NYMEX. Finally, notice how gold prices start moving up after the open of the Hong Kong gold market (because of Asian demand).)


Monday's 24 hour gold chart:

(Notice the spike in selling right before the Hong Kong gold market opens. Had the selling been delayed half an hour, demand from Hong Kong could have helped absorb the selling, giving the seller(s) a much better price and preventing gold from falling as much.)


My reaction: Someone is repeatedly dumping huge quantities of paper gold onto the market over very short periods of time. No profit oriented gold investor would act this way. A legitimate investor selling gold would spread his sales out to get the best possible price and would wait for the periods of the day where there is the highest trading volumes (ie: not selling right when the market opened).

If this type of selling only happened once in a blue moon, it could be explained by some institutions being forced to liquidate its trading positions. However, the odds of four different institutions being forced to liquidate their gold holdings at suspicious intervals over a three day period are next to zero.

Finally, Since long positions are limited in size on the COMEX, these selloffs are either the closely coordinated liquidation of several dozen long positions (why would investors long gold conspire to lose money anyway?), or they involve a massive wave of short selling.

See my other entries on manipulation of gold on the COMEX for more info:

Something Going Haywire In Gold Markets

Who shorted gold after fed's announcement last week?

How Governments Manipulate the Gold Market


Conclusion: Four massive unexplained spike in (short) selling represents a blatant attempt at price manipulation (trying to scare longs and trigger stop loss selling). It is undeniably a sign of desperation on the part of those trapped on the short side of gold.

This entry was posted in Gold, Market_Skepticism, News_Developments. Bookmark the permalink.

19 Responses to Increasingly Blatent Attempts to Suppress Gold Prices Are Evidence Of Desperation

  1. Anonymous says:

    Very persuative, thank you very much! These often happen at the Foreign Exchange as well.

  2. Anonymous says:

    The graphs you show are quite convincing of a timed sales of gold by an agency.
    But on the other hand, why desperation? what's the manufacturing cost of a $100 bank note for such agency, $0.001 ?? and if its an electronic note entry much much less. Furthermore the law doesn't apply to the agency in question. So even if manipulation is objectively and blatently proved, so what?

  3. stibot says:

    So what? If you are US citizen I underestood you are one of those who will be left with more banks' debts. If US banks are selling gold at suppressed price they generate a loss (and profit to buyers) and someone has to repay it: of course it will be the taxpayer.

    On the other side, do not worry, using some simple calculations: it is probably still very cheap game for US taxpayer:

    US will loose billions on gold's game but since it is the way how to keep dollar strong, it can obtain 10 or 100 times more issuing bonds or using printing press.

  4. Anonymous says:

    So what......So, go to buy cheap physical gold asap. However, it is very difficult to get phy gold. That will result the cheaper the paper gold, the more expensive the phy gold. It is a ridiculous world.

    John Paulson, who made billions of dollars by the credit crisis, had just plunked down $1.3 billion for gold miner AngloGold.

  5. Degaz says:

    Gold is looked at as the antithesis of the dollar. The FED MUST keep the gold price down to keep the confidence up in the dollar and treasuries.

  6. I'm not sure why people believe that central banks and governments hold the price of Gold down? It's just conspiracy theories. The very fact that everything - apart from Gold - has collapsed in price, shows that Gold has actually gone up in value. I'm from the UK and it has rocketed against the pound since our currencies fall. The reality is there are still very strong deflationary forces with people scrambling for cash. Gold may even go down in the course of the year - I hope it does so I can buy some more.

  7. Hugo says:

    @Phill Tomlinson Its not a conspiracy. Its a fact now. Greenspan, Volcker and other central bankers have said publicy that central banks are manipulating the price of gold.

    Unless you consider those conspiracy guys, the gold supresion is a fact.

  8. Anonymous says:

    Phil Tomlinson, please go and educate yourself. let me help you out; This is a quote "Federal Reserve Chairman Alan Greenspan acknowledged as much In testimony to Congress on July 24, 1998, that "central banks stand ready to lease gold in increasing quantities should the price rise."

  9. Anonymous said...
    The graphs you show are quite convincing of a timed sales of gold by an agency.
    But on the other hand, why desperation? what's the manufacturing cost of a $100 bank note for such agency, $0.001 ?? and if its an electronic note entry much much less. Furthermore the law doesn't apply to the agency in question. So even if manipulation is objectively and blatently proved, so what?
    The more open interest grows on the COMEX, the less credibility gold futures have. Right now, rising gold demand is causing open interest to increase steadily, and this rapidly increasing open interest at a time of widespread gold shortages in the retail market is causing a lot of confusion for investors. These worried investors are starting to demand delivery in substantial numbers, which this is causing those short gold to panic. There is only small amount of physical gold left to meet these delivery request, and, once that is gone, short will be unable to meet their contractual obligation to the delivery gold. This default on COMEX gold futures represents the end of paper gold. The admission that the COMEX's vaults are empty will shock the world and trigger a flood of delivery request on all manners of paper gold.

    Shorts are terrified by the imminent collapse of gold paper and are absolutely desperate to slow the growth of open interest to maintain confidence in gold futures, indirectly slowing demands for delivery. This is why they are engaging in frequent short selling attacks to trigger stop loss orders (knocking out some longs) and scare off other investors. Shorts would not be using these attacks unless they were desperate, as they offer clear evidence of manipulation. Also, the frequency of these selloffs is proof that this tactic to drive open interest is losing its effectiveness.

    To summarize, those short gold are so desperate to keep open interest down that they are engaging in frequent, obvious attacks on gold prices, and these attacks are becoming increasing ineffective. I hope this answers your question.

  10. Anonymous says:

    Eric,

    Seems like same deal is happening in silver...

    http://jessescrossroadscafe.blogspot.com/2009/04/silver-first-notice-day.html

  11. Anonymous says:

    GDP declines by 6%. Chrysler goes bankrupt. Funky pig flu's shutting down the neighboring economy and threatening here. . . and gold goes DOWN.

    The price of gold is the price of gold. It's neither more nor less than you think it is. Keep telling yourself it's desperate manipulation. In a few months you'll be selling your gold for $650 and realizing you're the sucker.

    They have unlimited ammunition and time. You have little of both. This is a war of attrition and you're going to lose. The house always wins. It's best just to leave the casino. If you invest neither in their gold nor their stocks and pay off your debts, you're out of their clutches. That's the only way you can win against them: by not playing.

  12. Anonymous says:

    desperation....the pigmen? c'mon...they got everyone by the balls. And if they feel things slipping...well....they'll just let some viruses go!!

    lalalalalala

  13. Phill Tomlinson said...
    I'm not sure why people believe that central banks and governments hold the price of Gold down?LOL. I believe that commercial banks hold the price of gold down because it is only thing that make sense.

    Seriously, think about it. Commercial banks have the ability to sell gold IOUs in unlimited quantities, with no margin requirements or supervision. (This is fact)

    My positionBanks have been irresponsible in every aspect of their business that we know about (subprime CDOs squared, for example) and have no risk control. Logically, these banks therefore are virtually guaranteed to have abused their ability sell paper gold and have boxed themselves into a massive short position as a result. To support this is overwhelming evidence of efforts to suppress gold. The graphs above are only a tiny part of this mountain of evidence of gold manipulation. To summarise, I believe gold is being manipulated because it makes perfect sense and all the evidence supports it.

    Your positionCommercial bank have been responsible participants in gold markets. They didn't take advantage of their ability to sell non-existent gold to gullible investors, and or make insane (paper) profits via the gold carry trade. Despite operating without reserve requirments thanks to an accounting gimmick (deposit reclassification), commercial banks resisted the temptation to do the same in the gold market. Despite selling 2.7 trillion treasuries they didn't own last November, commercial banks have refused to sell gold they didn't own. Despite building up trillions in OTC derivatives and creating overleveraged off-balance sheet financial vehicles (ie: SIVs, VIEs, etc...), banks have not acted irresponsibly in any way in the gold markets. Despite evidence that suggest with 99.999 percent probability that gold manipulation is occurring, it makes sense to believe the 00.001 percent chance that it isn't.

    Sorry for picking on you, but I just wanted to convey how ridiculous I find the idea that "everything is legit" in the gold markets. How can someone, after the last year and a half, still believe that banks are responsible market participants? That seems far, far more insane that even the most outlandish conspiracy theory.

    The very fact that everything - apart from Gold - has collapsed in price, shows that Gold has actually gone up in value. The reality is there are still very strong deflationary forces with people scrambling for cash.Everything "has collapsed in price" in big part because banks are selling tons of paper commodities. This is the result of a warped perception of risk in the market place.

    Right now, the entire commodity derivative market is built on the idea of no default risk. This is to say, investor are now taking default risks very seriously in the credit markets (after experiencing horrible loses due to financial crisis), but these concerns over counterparty solvency are completely absent in commodity derivatives.

    We now have a twisted situation where insolvent financial institutions can't even sell bonds (promises to deliver dollars at a later date) without an FDIC guarantee, but those same financial institutions have no problem selling investors OTC commodity derivatives (promises to deliver commodities at a later date). While there is no transparency to the OTC commodity derivative market, simple logic dictates that financial institutions are taking advantage of the complete absence of risks premiums and cheaply selling enormous amounts of commodity denominated debt to meet funding needs. As long as counterparty fears remain absent from commodity derivative markets, the number of financial institutions turning to those markets for funding will continue to grow, causing the commodity credit bubble to grow ever larger.

    Widespread deflation fears have undoubtedly made the commodity credit bubble worse. After all, if the price of commodities is expected to fall, why sell debt denominated in dollars? Selling commodity derivatives instead would make far more sense.

    Unfortunately, as the credit crisis has demonstrated so far, reality eventually catches up with those selling debt they have no hope or means of repaying. Default will begin occurring on commodity derivatives, most probably COMEX gold futures. Unlike the credit bubble, the fed will be powerless to stop deflation of the commodity credit bubble, as it can't print commodities.

    (Concern with default risks is also absent in the stock market, bond market, and currency derivative market. This complete absence of risks premiums on commodity denominated debt and currency derivatives is not sustainable.)

    Gold may even go down in the course of the year - I hope it does so I can buy some more.That isn't a very good bet, as deflation is soon to start in gold and other commodities.

    Deflation isn't limited to paper money (dollar, pound, etc...). In fact, deflation has nothing to do with paper money: it is about the destruction of credit money. Below is an extract from the Wikipedia's explanation of the history of money which explains what credit money is.

    Credit money

    Credit money often exists in conjunction with other money such as fiat money or commodity money, and from the user's point of view is indistinguishable from it. Most of the western world's money is credit money derived from national fiat money currencies.

    In a modern economy, a bank will lend to borrowers in excess of the reserve it carries at any time, this is known as fractional reserve banking. In doing so, it increases the total money supply above that of the total amount of the fiat money in existence (also known as M0). While a bank will not have access to sufficient cash (fiat money) to meet all the obligations it has to depositors if they wish to withdraw the balance of their cheque accounts (credit money), the majority of transactions will occur using the credit money (cheques and electronic transfers).

    Strictly speaking a debt is not money, primarily because debt can not act as a unit of account. All debts are denominated in units of something external to the debt. However, credit money certainly acts as a substitute for money when it is used in other functions of money (medium of exchange and store of value).Deflation can happen in any asset class whose supply has been boosted by "credit money" (debt/IOUs). This might be confusing, but by reading the two examples below, you should get an idea how deflation can (and will) happen in the gold market.

    From the Wikipedia's explanation of the history of money:

    Warehouse receipts

    Warehouse receipts became a very successful form of representative money in ancient Egypt during the reign of the Ptolemies around 330 BC. Farmers deposited their surplus food grains for safe-keeping in royal or private warehouses and received in exchange written receipts for specific quantities of grain. The receipts were backed and redeemable for a usable commodity. Being much easier to carry, store and exchange than bags of grain, they were accepted in trade as a secure and more convenient form of payment, acting as a symbolic substitute for the quantities of food grain they represented. The warehouse receipt itself had no inherent value. It was only a symbol for something of value.

    The invention of representative money had profound effect on the evolution of both money and society. It directly led to the creation of a new social organization, banking. The network of royal and private banks that were created during the reign of the Ptolemies constituted a national grain or giro-banking system. Grains were deposited in 'banks' for safekeeping. Warehouse receipts
    were accepted as a form of symbolic money because they were fully 'backed' by the grains in the warehouse.

    More important but less obvious, the introduction of banking by the pharaohs made possible the creation of money. Until then new money could be grown as a crop, raised as an animal or discovered as metal in the earth. Now it could be created by writing a warehouse receipt. At first these receipts were issued only when additional grain was deposited and cancelled whenever the grain was withdrawn from the warehouse. But it required only a small step in imagination for the bankers to realize that they could also create new grain receipts on other occasions. If someone applied to the bank for financial assistance, the bank did not need to provide it in the form of grain. It could simply create and give to the borrower a new warehouse receipt that was indistinguishable from those issued when grain was deposited. Although the new receipts were not backed by additional deposits of grain, they were still backed by the total value of grain on deposit at the warehouse and, therefore, readily accepted in the market as a medium of exchange, so long as the public had trust and confidence in the overall financial strength of the grain bank.Creating indistinguishable warehouse receipts = creating "credit money"

    Here is an another example of how "credit money" can expand the supply of a commodity like gold

    Hundreds of years ago people would pay the local goldsmith to store their gold for them in his vault. He would then give them a receipt for the amount of gold that was stored. The receipt was not money, it was a money substitute. It was later common for people to use the receipts as payment for goods and services since they could be exchanged for the gold held in the vault at any time.

    The goldsmith found out that only a small amount of the gold was ever claimed since people just kept exchanging the receipts. The goldsmith started writing receipts for more gold than he had, using some of the receipts to buy things and loaning the rest at interest, while taking title to real property as collateral. The gold for these extra receipts did not exist. By adding to the amount of receipts in circulation, the goldsmith stole from the people with the real receipts and decreased the value of the real gold receipts by creating inflation. The more of something there is, the less it is worth and more it takes to trade it for something else.When the public stops trusting banks, people start redeeming their warehouse receipts (or requesting delivery of gold futures). This is a run on the bank. As banks have been selling IOUs for assets they don't own (warehouse receipt is an IOU) and since no one can print gold or grain, widespread defaults and bank failures follow.

  14. Anonymous says:

    With so many manipulations going on and so much corruption with the government and on Wall Street, I don't want to keep much in stocks and government bonds. I sleep better with my silver (and to some extent gold).

    Hi, guys, go to Kitco.com and buy silver. I bought quite some 1000-oz silver bars days ago from Kitco and picked them up from New York city (vault with HSBC). the premium is only 0.3 per oz above spot for silver. There is no insurance and shipping fee when we pick them up. I like gold, but I like silver more.

  15. Don't get me wrong, of course prices are being manipulated by the central banks. Just like the recent housing bubble, house prices were distorted as central banks, just like their Commmunist central planning counterparts target flawed metrics that has no reality with real market forces. The idea that the price is manipulated is built into the system - all prices get distorted as the Central Banks that blow bubble after bubble with the commercial banks playing the game. But they can't target specific prices - only the ones that appear in their flawed CPI algorithms.

    We are now entering the Government Bond Bubble and Currency bubble (such as the state the Dollar finds itself in) but as with all bubbles they will go on longer than people expect. When that bursts we will get the commodity bubble, where Gold, Silver etc will in all probability (as long as the current polices are still ongoing) go much higher.

    Remember in 1973/1974 there was a credit crunch and gold HALFED in value until 1976, then rocketed up in price. We may or may not have a similar situation to this, as Central Banks frantically try and replace the credit that is being destroyed. Inflation is the endgame - but it takes a while. An extreme case is Zimababwe which took years to get into hyperinflation (I did a post back in December on this, Ringing Endorsement) but once there it quickly gets out of control.

    Appreciate the comments.

  16. Anonymous says:

    I looked at Phill Tomlinson's blog at
    http://theageofstupidity.blogspot.com/search?updated-min=2009-01-01T00%3A00%3A00Z&updated-max;=2010-01-01T00%3A00%3A00Z&max-results;=12

    and found it very interesting.

    I am not a financial professional and can not time market. I have just bought a lot of silver as long term investment. There is no counterparty risk, and I am not worried about Wall Street fraud anymore. I know that I will maintain my purchase power 5 years down the road ( At least I believe so). I don't care what happend in the next 1-2 yers. There is no tax consequence for now (which is great).
    I believe that silver is undervalued compared to gold. The only drawback is that silver is much more bulky.

  17. Anonymous,

    I am also not a market timer and also hold Precious Metals - and like you say in 5 years it will be worth more.

    I am taking a risk - a bigger risk then people on here as I hold UK pounds - but no risk no reward. I am just waiting to see what happens. Either way I will buy more - mearly pointing out the contrarian view as many institutional investors have jumped into metals recently.

  18. chiefio says:

    FWIW, you can get platinum coins (nobel) and due to auto sales being way down, platinum is way down. It has less bulk than gold and more upside if the economy ever picks up (intrinsic value in catalytic processes).

    So in addition to gold and silver, I've got some platinum...

    It acts as a counter point to gold in that they often move counter cyclically.

  19. Anonymous says:

    Hi Eric,

    well that's not "somebody dumping paper gold" as you describe.

    That's prticularly Europen Cntral Bank (which is occupied by rats of the smae Fed-led cartel, or maybe it is London-led international cartle with some mmbers siiitng in Fed GS an JP, whatever) - every time you see the huge dumping of gold - it is backed by ECB. for example they were dumping by approximately 10 tonns of physical gold every week in March-april and particularly in the week you refer to - they dumped 37 tonnes at ones.

    Mind it, it's physical (plus 10 times more paper derivatives) - and still it does not work much. Clearly, they run out of ammunition.

    Just please read their reprots about gold holding.

    Also not, LBMA site does not work for 2 days already - something brewing.

    last tiem that happne in December (actaully back hen it was working , but he repoting of GOFO and SIFO were delayed), later i tturned out that was backwardation in silver.

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