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Posted on 08/29/2008 10:56:06 PM PDT by TigerLikesRooster
Big jump in gold sale spurs manipulation talk
Some analysts say only manipulation is government's attempt to take down oil
By Moming Zhou, MarketWatch
Last update: 7:54 p.m. EDT Aug. 29, 2008
NEW YORK (MarketWatch) -- Recent heat from Congress and regulators, along with public speculation, over whether commodity prices are being manipulated has also reached gold pits, where the debate was stirred by a surge in bets last month that gold prices would fall.
"Congress is already investigating allegations of manipulation in the oil market, and it seems likely that it is only a matter of time before a similar investigation will be required in the precious metal markets," said Mark O'Byrne, executive director at Gold and Silver Investment.
Three unidentified U.S. banks held 86,398 short positions, or bets that gold prices will fall, in the COMEX gold market as of Aug. 5 -- 10 times more short positions than a month earlier, a government report showed.
The report by the Commodity Futures Trading Commission, which regulates U.S. futures markets, also showed short positions held by three U.S. banks in silver futures had increased more than four times during the same period.
(Excerpt) Read more at marketwatch.com ...
Ping!
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So they sold at (what they think is) the high.
They’re taking a risk, and if they’re correct in their prediction they’ll be rewarded. If they’re incorrect, they’ll pay the price.
How is this manipulation? Anyone who holds the same view and has the balls to put their money on the line can take the same position and reap the same reward...or take the opposite position if they think the reverse.
4 later
It is like Fed's interest policy. It is called intervention but is also a manipulation. However, Fed's movement is public and frequently predictable. If a group does this kind of thing without the knowledge of general investors in the market, it could be called a manipulation.
Sounds like a free market to me.
Did Gold drop faster than it was Supposed to?
Manipulation can go both ways. However, it is true that rise in gold price can make certain powerful financial interest unhappy. It could adversely effect currency values and monetary policy in general. So it is not a stretch to be mindful of some manipulation or intervention to keep its price from going up.
I don't think gold price should always go up, unlike some people who thought that their real estate price would always go up or stock price will never come down. I am not going to be rich from gold because I have none. I know there are some perennial gold bulls out there. On the other hand, there are mindless gold bashers, too.
Economy always change and the dogma that gold is always good (or always bad) is a stupid idea. These people should settle their personal hang-ups in some place else.
So the size of short positions may be the key. If it is too big and grew too fast, it could certainly reverse the trend. Some say it is too big even for some major player. Maybe some central banks?
It is not a “free market” when banks can borrow from the Fed at 2%, and further be assured by the treasury that if their “bet” looses, the taxpayer will wind up holding the bag. Clearly, the treasury has an interest in demonizing gold and cheering on paper money, no matter what the ultimate consequences will be to the people. Do you know what happened to your dollar over the last 10, 20, 30, 40, 50 years? It is a shadow of its former self. Guess what it will be 10 years hence...
That’s backwards. When the Fed moves its interest rate, it’s government fiat. It doesn’t matter where rates would be in the free market, their decision overrides the sum of all individual voluntary actions.
Selling gold is selling gold. It’s irrelevant whether you bought gold yesterday, a year ago, or a decade ago, or plan to buy it tomorrow, next year, or ten years from now. The market is what it is...a combination of prices people are willing to buy at and prices they’ll sell for. If you offer something above the market, the transaction won’t happen (just like trying to sell anything for more than people are willing to pay). If you want to sell, you have to offer it for a lower price where people are waiting to buy.
There is no magical “appropriate” amount to sell...you can sell as much as you can afford to. In fact, as you take on a larger and larger position liquidity becomes more of an issue, because you sell whatever people are bidding at a price, and then have to offer the next lowest price to sell any more. In that sense it’s self-regulating...as you sell more and more, it’s at worse and worse prices for you (and better and better deals for the buyers scooping up your sales). It’s the law of diminishing returns on steroids.
It’s actually worse than that. First off, as soon as you quit selling, you’re left holding a bunch of short contracts at below-market prices (you just held a fire sale, after all). Buyers will step in and bid the market back up. Maybe not all the way to where it was before your sale, but certainly enough to make your sale a very bad one. The second part is that traders are a vicious bunch, so in addition to buying a bunch of contracts “on sale”, they recognize as soon as you quit selling that you’ve accumulated a substantial short position. When you put your huge bid in to buy everything back on the cheap, they’re going to laugh at it (and certainly not sell back to you even cheaper).
In fact, they’ll start attacking your position...buying contracts outright, even at higher prices than they were willing to while you were still selling, because they know you’re most likely highly leveraged and every price they push it against you will magnify your paper loss until you exceed your margin and have to “puke” your position for a huge loss (ie buy back all your shorts at the market, making them money on their long positions).
Every single night we watch guys try to bully the market. Every so often they’re able to push things far enough against us to make us puke and take a loss, but that’s the exception. What happens day in and day out is that we scoop up contracts “on sale” (or sell them very preciously, if it’s a huge buyer getting long), wait until the guy runs out of steam, and then ride the market back toward equilibrium. By taking the other side of these big moves, we push the market back towards efficiency, and get rewarded for it.
There are certain issues which can unite vicious financial entities who routinely backstab one another all the time. Gold can be one of them. Because they always need lots of credit to lift the markets.
Anybody seen Soros?
Get it people - you is being robbed!
The point is that ultimately gold and silver are not subject to arbitrary manipulation by central banks. They continue to be a better store of value than paper currency, no matter what the bankers’ want. Central banks still keep a storehouse of gold to backstop (short term) their currencies, intentionally depreciated year after year. They are fabulous crooks.
The price of oil seems to be a gold hedge. Lets watch these as two hurricanes bear down.
There is no liquidity in banks right now. It’s coming back but this election has everybody messed up. Sell your commodities at the right time.
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Oh no! The price of gold goes down as well as up. Who knew?