Sunday, April 13, 2014

Manipulation of Gold Market is No Longer Debatable

The manipulation of the gold market is not something that’s really debatable any longer. The evidence for it is very clear and I talked about this in my new book, The Death of Money: The Coming Collapse of the International Monetary System, particularly in Chapter 9 which is about gold, but also in other parts of the book.

Now the particular class action lawsuit that you’re referring to is aimed at the five members of the London Gold Fix, which is a London-based process whereby the price of gold is set twice a day by kind of an interaction indication of interest among these five major dealers and we’ll see how that plays out.

Now these lawsuits can take years to work out because the defendants typically come in, and file a motion to dismiss and that has to be argued and then decided by the judge. If the plaintiff gets to go forward, you get into discovery and then that opens up a lot emails and so forth. So the cases take years to play out.

But beyond the London Fix, there are other forms of manipulation that may be even more important to gold investors, particularly on the COMEX, that’s the commodities exchange based in New York. And there are some very interesting recent statistical studies. I’ve seen some of them myself.

One is about to be published. It will promulgated out, but I’ve see some private research on this and what it shows is that, for example, if you could go back ten years and have two hypothetical accounts, then one of them would buy the open on the COMEX every day and sell it at close, so you would basically own the COMEX trading hours.

And the other account would buy the spot market after COMEX closes and sell in the spot market just before COMEX opens the next day. So one account, in effect, was on the COMEX trading day and the other account would own the afterhours.

Now what’s interesting is that over a ten year period those accounts should perform almost identically. On any given day there could be some differences or some volatility based on the timing of particular events, but that’s going to even out and over ten years they should be the same. In fact, they were nowhere near the same.

The COMEX accounts showed massive losses and the afterhours accounts showed massive gains, both deviants from the overall market. And what that tells you is that the COMEX is being manipulated, and the price is being suppressed, mostly with large sell orders at the close. Then it would pop back up again in the afterhours. So this is a smoking gun.

This is like if you find a body with a bullet hole in it that you didn’t see the crime, detectives say “Who has the motive” and they look for DNA. So this statistical evidence is like the DNA. It proves the manipulation, even if you didn’t actually see it happen. Although sometimes, you do see it happen with these larger…

So if I were running the manipulation I would actually be embarrassed at this point because it’s so blatant. So I think the London Gold Fixing cases are important, but they’re not the only evidence. The weight of evidence is clear that the gold market is being very heavily manipulated.

- Source, Sprott Money: