Just cleared from e-mail tray
On 31 May, 2012, at 3:36 PM, R wrote :
Gents,
That's what i wrote in my last gold report on the topic of manipulation/intervention:
"There is a thin line between intervention (normally by the government, government-related institutions, or more generally, politicians) and manipulation (negative connotation - as in "influence"). The (sometimes massive) interventions on the bond and currency (foreign exchange) markets are official and legitimised.... It would therefore be naïve to think that this was not happening in the gold market.
That said, the primary trend in gold and silver is clearly headed upwards. According to the Dow Theory, the primary trend cannot be manipulated because the inherent market forces are too strong.
Greets from Vienna, R
On 31 May, 2012, at 4:22 PM, H wrote:
This is another point: if someone has managed to keep the gold price lower than it would otherwise be, they create opportunities to buy it cheaply.
By the way - I am not saying that there is ZERO manipulation. For instance, I find the evidence that prices (of both stocks and commodities) are 'pinned' during options expirations very persuasive. However, it does not always work (but more often than not it does).
On 31 May, 2012, at 4:19 PM, H wrote:
Actually, yes, I'll make a list. I do have a few very concrete questions, but in order to put them all together I must look a few things up.
On Thu, May 31, 2012 at 9:03 AM, M wrote:
H -
I believe a few of us are going to have dinner in about 12 days with someone from GATA.
Do you have a list of questions that we should specifically pose to him? <g>
M
On Thu, May 31, 2012 at 6:54 AM, T wrote:
All reasonable points and perspectives.
As I said, please consider my position to be incorrect and conspiratorial. Also consider that trading as if there was a concerted effort to restrain gold has been very profitable. Thus, pretending that gold will be attacked at (predictable) juncture A or B is effective irrespective of if there is a conspiracy to contain the rise in gold or not.
I shall continue to pretend that such conspiracies exist, as from the perspective of my personal greed (which is considerable) it has been very profitable.
On 5/30/2012 10:47 PM, H wrote:
OK, allow me to make one more point: for every seemingly suspect move in the gold price (such as the post LTRO decline), there is always an alternative explanation available that is at least as good in explaining the move. For instance, given that gold moved up $270 from its December lows into the LTRO, it may simply have been a 'sell the news' event, that happened to trip a number of stops. Speculative length in the market was huge at the time.
I would also point out that I'm probably not exactly lacking in cynicism about government. But I also know it's the most inefficient and bungling organization there is. It cannot keep a secret as big as this one imo, for lack of ability.
Lastly, I have always been of the opinion - and continue to hold this opinion - that even if every allegation made by GATA and similar outfits is true, and there is indeed surreptitious manipulation occurring, it will not be possible to keep the gold price from going wherever it needs to go short of completely outlawing the gold market (and then it would go where it needs to go in the black market, so even that would not help).
It would certainly be a big scandal if governments were to be intervening in the market in secret, but it wouldn't alter the path of the primary trend.
Gold has been by far the strongest currency in the world for 12 years running. What's not to like? By what yardstick can one profess to know that it 'should' be trading at a higher level at this point in time?
Note the qualification: 'at this point in time'. I certainly agree that it WILL go higher - I don't think its price fully reflects the fundamentals yet, and it certainly is not pricing in the likely direction the fundamentals are going to take in the future (according to my personal assessment of same). But just because I think a market should already be trading higher (or lower) doesn't mean it has a duty to comport to my views right now. I thought FNM trading at $73/share in late 2007 was patently ridiculous. But the time for it to go to zero was simply not ripe yet.
On Thu, May 31, 2012 at 4:29 AM, T wrote:
I can accept that all of these points are rational and plausible.
And then I recall the price action in gold within minutes of the announcement of the ECB's LTRO in December.
It should be very clear that I have tremendous respect for your knowledge and your character, but we simply disagree on this point. And not many others.
Such things are good, as every army needs archers, swordsmen, and some who just think about battles while drinking coffee from the comfort of the tower.
Two final points. What would the Dollar price of gold be today without the intervention that I suspect? We don't know, but we can assume the beautiful performance we have enjoyed on the long side would be much more beautiful. And last this idea of losses when talking about maintaining the value of fiat is confusing to me. If my agent loses 2 billion each time he holds down the price of gold by $100 is this amount even a consideration when thinking of the aggregate value of all my fiat currency (both digital and in circulation)? I think not. It is simply a cost of business.
Think of my views on this topic as simply wrong. Conspiratorial even. I'm very comfortable with that characterization.
On 5/30/2012 10:17 PM, H wrote:
Yes, of course the Fed's QE is also about asset prices - but as you say, they are telling us openly (Bernanke publicly took credit for pushing the Russell index up).
Given that gold is a monetary asset, surely they would be able to concoct a story about how it is necessary for them to intervene in that market? They have no trouble concocting them for their other interventions.
As to the short positions of commercial hedgers: it should be obvious by now that the vast bulk of these positions are bona fide hedges that are offset by long positions elsewhere - it can not be otherwise, as I've demonstrated with a simple example in the past.
In brief: every gold futures contract at the COMEX is over 100 ounces. Commercials have been massively net short the futures since gold first crossed the $270 level back in 2000. They have not been net long even ONCE ever since. Currently the net short position is small at about 136,000 contracts, but it has at times been almost twice as high. Let us take a 200,000 contract net short position. That's 20 million ounces of gold, so every $10 move higher would create a $200 million loss, every $100 move higher a $2 billion loss.
Which bullion bank reported billions in losses when gold moved up from $700 in late 2008 to $1900 in late 2011?
Not one - and there's your answer - the bulk of the position consists of hedges. Remember that JPM recently had to admit to big losses in a far less transparent market, so the idea that they simply don't tell us when they lose billions isn't going to fly.
Actually, I think most of our modern-day central bankers have so little knowledge and understanding of gold, they simply don't care much about it.
On Thu, May 31, 2012 at 4:04 AM, T wrote:
As for motive, that one alone is sufficient. How about the motive of the large banks creating attractive exits for short positions, assuming they too are complicit in holding down gold and silver (at the Central Banks request)? How about the motive of Central Banks and their agents simply punishing those that elect to find a competitive store of value? This is different from just pure, "competition" in that the intent is to not only to make, "A" more attractive but to actively discourage, "B". Unlike a foot race where the only objective is to win, in this contest the goal is to win while at the same time attempting to injure the party who comes in second.
As for QE you state the Fed's goal is to lower yields? What else? The Fed (Bernanke and Brian Sacks) has clearly stated the objective is to inflation asset prices. The Fed is in the bubble game, and this is also an objective of QE. I guess that does not qualify as manipulation?
As I said, respectfully, we disagree on this topic. I appreciate your views and vast knowledge, but I also accept that on this one topic you are always in search of a rational and market driven solution to price action. Please accept that it's not just that I do not agree, but that I think you are very, very mistaken and have greatly underestimated the corruption of your enemy, which is a fatal sin in warfare.
I choose not to make this mistake and expect that my mortal enemy (The Fed, all central banks, all primary dealers, all those with a vested interest in maintaining fiat and it's long term, "advantages" of structural inflation) to use every possible tool available to them to weaken the value of my asset (in this case gold) and my resolve.
It's a Sun Tzu thing.
On 5/30/2012 8:42 PM, H wrote:
The only motive that I think is a sensible one in this context is that governments hate it when the currencies they issue face competition: gold's role as an indicator of the public's declining faith in central banks and governments is what provides motive. Since the banking cartel is deeply intertwined with government one could argue the motive extends to it as well.
However, governments quite openly manipulate markets when they wish to obtain certain results. The Fed does 'QE' or 'Operation Twist' to lower yields, the ECB has its 'SMP' to manipulate peripheral euro area bond markets, the SNB 'buys as many euros as it takes to keep the CHF at 1.20', the Japanese MOF frequently intervenes in the yen, the BoJ buys JGBs and even shares of REITS. Back in the 1960's and 1970's, governments equally openly attempted to manipulate gold, from the London gold pool in the late 60's to the treasury and IMF auctions in the mid to late 1970's.
So I have two simple questions: why should it be done secretly? And if it is done, how is it possible that in spite of the vast conspiracy this would require, we have not one shred of proof?
We even know about 'Operation Northwoods', about the Gulf of Tonkin incident today, we got the 'Pentagon papers' in the 70's - all of which were deeply embarrassing to government and surely were events it would have rather kept under wraps. All of them required far fewer conspirators and accessories than a concerted secret manipulation of the gold price would require - and still we know about them - with hard evidence buttressing the claims.
The alleged gold conspiracy by contrast - which has been said to be going on for at least 15 years (that's for how long I've heard about it) - with pretty much zero success to boot - has yet to produce its first credible witness, never mind anything that looks even remotely like hard evidence.
Moreover, as far as I'm aware, officials would be committing illegal acts if they were to intervene surreptitiously using gold held by the government. A surreptitious indemnification of proxies would be similarly illegal I believe. Why would anyone run this kind of risk if it could just as well be done openly?
Lastly, the attached chart shows what? To my eyes this is the most normal bull market chart in the whole world. It hews to trendlines, fibo retracements, lateral supports and so forth like few other markets.
If this is the end result of someone trying to manipulate stuff I own in a downward direction, I say 'bring it on'....'more please'! They are as manipulators go the biggest bunglers ever.
On Wed, May 30, 2012 at 8:45 PM, T wrote:
H,
Respectfully, we simply disagree about the extent of manipulation in the gold and silver markets (ok, ALL markets as far as I'm concerned).
So while this trade may or may not be anything unusual, the action certainly appeared so to me.
And, I look at the size of positions key firms hold in the paper markets and while I can understand that someone needs to take the other side of the trade, it routinely appears more than just suspicious to me.
But, I'm one of those always looking for motive first, last, and always.
On 5/30/2012 1:56 PM, H wrote:
Apparently gold doesn't know it's supposed to be going down. As to volume of 6,000 contracts in a 10 minute bar - what's so strange about it? Evidently a few stops were hit. You must not forget that futures traders going long gold here are betting on a very weak looking chart reversing course. They are probably using tighter stops than they otherwise would. Also, speculators have been busy reducing longs and adding to heir shorts for five or six weeks running. It's all good, it lays the foundation for the upcoming rally.
On Wed, May 30, 2012 at 2:29 AM, T wrote:
Thought you might enjoy Jesse's take on the gold trade today.
jessescrossroadscafe.blogspot.com
"One does not drop 11,000 contracts in a ten minute period in what might be called a reasonable trade." Sure one does, if one's goal is wack the price of gold <g>
With China and the ECB hinting that more stimulus might not be coming so soon, I expect a major engineering take-down in the broad market between now and around June 15 to pave the road for, "politically correct" QEx (please insert number of choice in, "x", as I've lost count).
|
