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Guest Post: Gold Market Is Not “Fixed”, It’s Rigged
Submitted by Adrian Douglas of Market Force Analysis
Gold Market is not “Fixed”, it’s Rigged
In 1919 the major London gold dealers decided to get
together in the offices of N.M. Rothschild to “fix”
the price of gold each day. While this was notionally
to find the clearing price at which all buying
interest and all selling interest balanced the
possibility for market manipulation and self-dealing
is inherently systemic in such a cozy arrangement.
This quaint anti-competitive procedure continues to
this day. In no other market in the world do the
major players get together each day and decide on a
price. Imagine if Intel, AMD and Samsung were to meet
each day to “fix” the price of microchips, or if the
major oil companies were to meet each day to “fix”
the price of crude oil; wouldn’t there be a public
outcry and a flurry of antitrust violation lawsuits?
The “fix’ is not open to the public, there are no
published transcripts of each fixing, and there is no
way to know what the representatives of the bullion
banks discuss between each other.
The current London Gold Fix is conducted by the
representatives of five bullion banks, namely HSBC,
Deutsche Bank, Scotia Mocatta, Societe Generale, and
Barclays. The “fix” is no longer conducted in an
actual meeting but by conference call.
The London Gold Pool that was instigated in the
1960’s was incontestably established with the sole
purpose of suppressing the gold price. Several
central banks furnished gold to sell into the market
with the aim of keeping the gold price at $35/oz.
This was overt market manipulation. How was this
achieved? The internet site
www.goldfixing.com
explains
here as
a historical fact that “1961 - Gold Pool of US and
main European central banks set up to defend $35
price, by selling at fixing to contain it”. So the
London Gold Pool sold into the “fix” to suppress
the price and no doubt the bullion bankers making
the “fix” were party to this scheme.
The London Gold Pool disbanded in 1968 when it
suffered massive outflows of bullion trying to
frustrate free market forces that were manifesting
themselves as insatiable demand for the metal.
As there is no London Gold Pool anymore does this
mean that this mechanism of selling into the fix to
suppress the gold price, that was pioneered by the
London Gold Pool, is defunct also? Absolutely not!
Analysis of the gold price data shows quite clearly
that the price of gold is being heavily suppressed by
the exact same mechanism.
Fortunately the bullion bankers added the AM Fix in
1968. This means there are two times in the day when
we know for sure that the gold price is being set in
a clandestine procedure that is controlled by just
five bullion banks.
Figure 1 Gold Market Timeline
We
will examine the characteristics of the prices
determined by the London Daily Gold Fixings to
demonstrate unequivocally the gold price is
suppressed. To do this let’s examine what happens in
a typical twenty-four hour period as illustrated in
figure 1. We have chosen to start and end the 24 hour
period with the PM Fix. Three and a half hours after
the PM Fix the Comex closes and gold trading is then
predominantly conducted in the eastern hemisphere
where the western bullion banks have much less
influence and the market has a much higher proportion
of physical metal trading than does London or the
Comex. The period from the PM Fix to the following AM
Fix is labeled “overnight” trading (indicated by the
blue double-headed arrow). The period from the AM Fix
to the PM Fix has been labeled “intraday” trading
(indicated by the red double-headed arrow). The
intraday trading includes most of the trading day on
the LBMA where 90% of the world’s gold trading
occurs. It would be fair to say that this is the time
of the day most influenced by the western cartel of
gold bullion banks. The “overnight” trading is the
least influenced by the gold cartel. But without
question the AM Fix and the PM Fix are determined by
a process under the direct control of five bullion
banks.
The London Fix data used in the analysis presented in
this article can be found at http://www.kitco.com/gold.londonfix.html
For purposes of demonstration let’s consider just a
small sample of gold price Fix data as shown in Table
1. It can be seen that if a trader bought gold on the
PM Fix on 7/26/2010 and sold it on the following AM
Fix on 7/27/2010 he would have made $0.5/oz on the
trade as shown in the “Overnight” column. If he were
to repeat this trade every day then his gains and
losses are listed in the column and would sum up to a
cumulative total gain of $22.5/oz over the seven
trades. If a trader bought on the AM Fix on 7/27/2010
and sold on the PM Fix on the same day he would have
lost $16/oz as shown in the “intraday” column. If he
were to repeat this trade everyday his daily gains
and losses are as shown in the intraday column and by
8/4/2010 he would have cumulatively lost $6.5/oz. The
cumulative gain or loss is recorded for each day in
the columns labeled “Cumulative Intraday” and
“Cumulative Overnight”
Table 1: Sample of Gold Fix Data
Figure
2 shows the cumulative gains/losses for “intraday”
and “overnight” daily trades since the start of the
current bull market in April 2001. This chart is
astonishing. The cumulative price change between the
AM Fix and the PM Fix in the last 9 years is negative
$500/oz while from the PM Fix to the AM Fix it is
positive $1,400/oz. What this means is that if a
trader had each and every day purchased gold on the
AM Fix and sold it the same day on the PM Fix he
would have lost $500/oz. If he had instead bought
gold every day on the PM Fix and sold it the
following day on the AM Fix he would have made
$1400/oz. (these calculations exclude fees and
commissions). One could go further and say that if a
trader had shorted gold on the AM Fix and covered the
short on the PM Fix and then bought gold on the same
PM Fix and sold it the following morning on the AM
Fix and repeated this every day over the last 9 years
the trader would have made $1,900/oz; a buy and hold
strategy by comparison would have gained only
$950/oz. ($250/oz gold price in 2001 to $1200/oz in
2010).
Figure 2: Cumulative Intraday Change & Overnight
Change 2001-2010
The
change in price between the AM Fix and the PM Fix are
cumulatively making a trend which is increasingly
losing money in a very strong bull market! Clearly
the fixes are not being set to “clear the market” but
are being manipulated to suppress the gold price. In
figure 3 the same chart as figure 2 is shown but with
the right-hand scale inverted.
Figure 3: Same Chart as Figure 2 with Right-hand
Scale Inverted
What
this shows is that the more gold rises over night in
essentially Asian markets the more it is sold down
into the PM fix. This was exactly the modus operandum
of the London Gold Pool but now it is being done
covertly.
Figure 4: Cross-plot of Cumulative Intraday Gold
Price Change & Cumulative Overnight Gold Price
Change (2001-2010)
Figure
4 is a cross-plot of the cumulative intraday gold
price change against the cumulative overnight gold
price change. The chart shows that the cumulative
amount that gold has declined between the AM Fix and
the PM Fix at any time in the last nine years
displays a linear correlation with the cumulative
amount that gold has risen from the PM Fix to the
following AM fix for the same period. The correlation
coefficient R2 is
0.95 which is very close to a perfect correlation of
1.0.
This shows that someone is consistently selling down
the PM Fix and the amount of the cumulative sell down
is almost perfectly linearly proportional to the
cumulative amount by which gold trades up overnight.
That can not happen by chance.
Table 2: UP & DOWN Days for Intraday &
Overnight
Table
2 shows the total number of up days and down days for
both the intraday and the overnight trading from 2001
to 2010. There is a striking contrast. In fact there
is almost a mirror image where the number of up days
overnight is very similar to the number of down days
intraday. The probability of getting this contrasting
result at two different times in the same 24 hour
period, in the same commodity market, and over a 9
year period is approximately one in 2.6 x
1031.
In
other words it is practically impossible for such a
divergence of data to occur by chance, let alone for
the divergence to have a nearly perfect correlation.
This is in fact a very sophisticated market
manipulation that is conducted to minimize the
chances of being noticed by a casual observer. In
Table 1 it can be seen that gold is not
systematically sold down the day following an
overnight rise. It is programmed and executed over
several days which is why it is only clearly revealed
by looking at the cumulative changes over time. In
figure 5 it can be seen that the AM Fix data and the
PM Fix data appear to almost overlay. This is because
the average difference between them is managed.
Figure 5: AM & PM Fix
(2001-2010)
Figure
6 shows the daily difference between the AM Fix and
the PM Fix charted as a percentage change from 2001
to 2010. It shows that a staggering 88% of the data
fall in the minus one percent to plus one percent
range. Equally surprising 98% of the data lie in the
minus 2 percent to plus two percent range. This also
can not happen by accident. The gold price has
increased 400% in nine years yet the percentage daily
price range between the AM and PM Fixes remains
locked largely in a 1% band. This is why the AM &
PM fix price data appear to overlay in figure 5
because the daily variation is tightly controlled.
This could only be achieved by market interference.
Figure 6: Intraday Percentage Price Change
(2001-2010)
The
inescapable conclusion is that some entity or
entities are deliberately suppressing the gold price
between the AM Fix and the PM Fix and that this
suppression is calculated to proportionately counter
the cumulative gains in price achieved in the Asian
markets that trade at some time in the period after
the prior day PM Fix until the following AM Fix. Such
a consistent manipulative effort would necessarily
involve entities with access to large amounts of
gold; this implicates central banks as they are the
only entities with large hoards of gold and
furthermore they have a motive for suppressing the
price of gold which is to hide their mismanagement
and debasement of their national currencies.
Furthermore the five bullion banks who conduct the
Fix would have to be complicit because by definition
they are responsible for determining the clearing
price on the Fix so they must be aware of the impact
on price of the selling activities of the entity or
entities who are offering gold in such large
quantities that it causes such price aberrations. As
the central banks do not trade themselves it is more
than likely that some or all of the banks involved in
the Fix also act on behalf of Central Banks. What is
irrefutable from this analysis is the gold market is
not “fixed” it is “rigged”!
The suppression of the gold price is achieved in
three main “theaters of war”:
1) The LBMA unallocated gold dealing is a fractional
reserve operation with a reserve of probably less
than 3%. This is largely a paper gold market that
masquerades as a physical gold market. Palming off
the unsuspecting investor with unallocated gold with
a very low reserve ratio prevents the investor’s
money from chasing real physical bullion which
inherently acts as a price suppression mechanism (see
my recent article
Proof of Gold Price
Suppression for
more details).
2) For the investors who insist on having physical
bullion it is important to suppress the price to
dissuade them from thinking it is a good investment.
As demonstrated in this article this is done by
selling gold into the PM Fix to counter the rise in
the price that occurs in the physical markets of
Asia. This is exactly the same tactics as employed by
the London Gold Pool of the 1960’s.
3) The large bullion banks, most notably JPMorgan
Chase and HSBC sell short on the Comex inviting other
commercials to join in the short selling binge to
create frequent waterfall drops that wipe out
speculators and serve as a cold shower for those who
are bold enough to make leveraged bets that gold
prices will rise.
Additional and complementary measures include the
establishment of largely unbacked Gold Exchange
Traded Funds (ETF) that serve to divert demand away
from the real metal. OTC derivatives that are used to
hedge the essentially naked short exposure that
exists by virtue of the fractional reserve nature of
the massive unallocated gold market.
The London Gold Pool failed due to insufficient gold
to meet demand. In those days the paper market was
not as dominant. By contrast it is through selling
massive amounts of paper gold that the gold cartel
has managed to keep the lid on its current price
suppression scheme. But therein they have unwittingly
planted the seeds of their own demise. I estimate
that 45 ounces of gold have been sold in unallocated
accounts for every one ounce that exists in the
vaults. When just a fraction of these investors ask
for their gold there will be a run on the bullion
banks of epic proportions. When 45 claims go looking
for one ounce of physical gold the rise in bullion
prices will be breathtaking.
If you own unallocated bullion you likely only have a
claim to about 2.3% of what you think you own. The
window of opportunity to get your investment to be
100% bullion is closing rapidly.
This article has shown that physical gold is being
dumped into the PM Fix to contain its price in a
covert version of the 1960’s London Gold Pool. The
result of the failure of the London Gold Pool to
suppress gold was an appreciation of the gold price
from $35/oz to $850/oz; a similar percentage today
would carry gold to almost $30,000/oz. This is not a
price forecast but an indication that when free
market forces have been frustrated by market
manipulation for a very long time the equilibrium
price can be many multiples of the suppressed price
and the rise is typically rapid when the suppression
is overcome. There are many growing signs that
suggest the
gold manipulation scheme is coming
unraveled.
The onset of an epic “gold rush” is fast
approaching.
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Your example seems flawed. If you want to understand why read FOFOA blog for an elegant explanation. But I can point out a few flaws. If one person has all the gold, it has no value. Gold achieves its highest value when in widest circulation. Also, you seem to have an idea that money value should decay over time. It should not. Your argument that labor value decays over time depends on definition of terms. People labor to build dams that produce electricity. The electricity adds value over time.
I am Googling for FOFOA, thanks.
I do realize that some institutions/companies/constructs continue to produce benefits over time. But please consider that more than 95% of businesses fail in the first five years. much more than 95% of labor is utterly worthless to everybody involved, except insofar as the worker was able to eat, live somewhere, and maybe save some money. That surplus money hurts my pocket book directly. It would hurt much more if it was backed by gold.
Congratulations! Your pursuit of FOFOA will be a real eye-opener. At least you have the open-mindedness to give it a shot. Johnny would rather belabor his misguided "education" than seek knowledge.
Here are some links for you.
Poopdeviville, I can sort of see the point you are trying to make with this resource economics. I think you need to elaborate with a few more examples.
Are you equating the depletion of the time value of money with the depletion of labour value? Are you saying that the reason that money becomes less valuable overtime is because the labour which it represents is eroding away?
I dont understand the statement about your pocket book being hurt. The fellow from the failed start up, also has a pocket book, his must be hurting too??!
I understand that if I hoard gold and force others to use it, I can place myself at the centre of an aristocracy. I can do the same with salt, beads, shells. The key is that this is exactly what should be avoided by not mandating a currency. I should be free to use whatever I want. Overtime, we would all come to an arrangement of what is the best representation of value. Salt or sea shells, may fall to the side because as with paper it is easily counterfitted. We would naturally choose something that could not be easily dupplicated or debased. That does not mean gold necessarily. Gold just happens to be particularly well suited for the job. Any other "value device" could work, you could have a private company produce notes, but without a monopoly on them. It is a question of trust and accountability. If a private company began to counterfit, they risk loosing customers to the competition. We have this now in the form of an oligarcy of central banks, which all debase, but i can shift between them and i have less confidence in some than in others. What if we had a company producing bits of paper that didnt/could not debase?
What should I work for? Glass beads? Oreos? Food Stamps? Crack?
The difference between a gold backed currency and an air backed currency is that the air backed currency isn't backed by air.
It's backed by labor, and the goods and services that the dollars can buy.
He didn't say anything about denying your right to "invest" money in a bubble.
If you want to buy dot com stocks in 2000, that's your business.
Keep up your smart ass attitude and you'll work for little more than a few baubles and a gutful of jizz.
You're a bright kid, but your arrogance, and UTTER unwillingness to accept ANY thoughts other than the ones you currently hold as true are going to be your downfall.
But, at least your young. Truckers all over America will let you suck their dicks in rest stops at 3:00 A.M. You won't go hungry.
Okay, I guess I'll have to do that, but only if it ISN'T for money.
Watch what you say to MR Geihtner, er Bravo. Definitely a shill, certainly merely my opinion
What should I work for? Glass beads? Oreos? Food Stamps? Crack?
With your skill set and winning personality, I'd suggest you take anything you can get, Johnny boy.
clearly you have enough Crack. I suggest you drop that and switch to Grass.
"Labor performed in the past is worth less than labor performed today."
Why do you believe this is true? I think people negotiate pay for labor based on expectations/predictions of future value. I worked for a start up that was quite risky and I was able to negotiate a higher sallary due to the risk involved. I've also worked for a large stable conglomerate at a slight discount because of the security.
Either way, for whatever individual reasons people have, they negotiate a mutually agreeable price for labor. It is the goverment eroding these mutually agreed contracts over time. Its a theft of labor.
One of the four primary purposes of money is "A store of value". Fiat paper inflation inherintly reduces its usefullness as a store of value and therefore as an instrument of exchange.
Inflation forces the populace to seek higher returns just to break even. Inflation is the government carrot on the stick!
trav7777 LOL well said
IF the market is so predictably, reliably and repeatedly rigged THEN we are making money, yes? Then why the beetching, yes?
"IF the market is so predictably, reliably and repeatedly rigged"
then why would you buy it at all, if it is rigged against you as you claim?
G$ will 'plot' H&S pattern on daily charts in a matter of days, with a 95-100 $ target below neckline breaking point.
I have a target of about 925ish eventually after the right shoulder stalls at 1220-1230ish.
You may very well be right on 925. For a time. So?
2 years from now? 3? Good luck. Try the Flying J's along the main interstates. Hint: The little signs in the trucks windows with the pictures of Lizards that have the red crossed out circle through them.... means they don't want you to suck them off.
You sure seem to know a lot about blowing truckers for money.
You tell me which ones will accept your services and everything. You must have a lot of experience.
TA on Au is going to leave you with only your weenie to hold on to JB !
It's worked out great for me so far. Every prediction I've made about it has happened.
Hulk, I guess you never saw the leaked JPM memo tasking Sr. VP Bravo and his boss JonNadler to talk down the price of gold. Take note of the bonuses they get by bringing gold to $900 / oz: $10 bazillion dollars!
Almost as high as FOFOA's numbers, LOL...
He is WORKING here guys! And it seems like he enjoys his job!
...
JB, I don't know if you ever caught my response to you elsewhere, but I had a friend who was REALLY GOOD at TA. But, he could never make sense out of the gold charts. They wouldn't "speak" to him. He declined me when I asked him to do a TA of gold for me a couple of years ago for money! He declined money for a what seemed to be not too much work.
Didn't see that leaked memo DCRB, but clearly JB isn't earning his bonus cause Au currently at $1225.
Buried canned ham in the backyard Biatchies!
Bravo your stubborn persistence over time, only on gold links says to me this is a job to you or you are awful fucken lonely. I figure its your job because you are so regular. While you do make it a bit interesting, the more astute and knowledgeble folks here are the ones i would like to hear from. Especially now as we are going in the shitter. I see you as much a waste of time as i am.
You do in fact pervert the thread and mange the direction . You have helped the fed in a small way. You make Geithner proudf, if you are not him.
I admit in financials i dont know shit, but am learning from the folks here. From you , not so much
Oh so now it's 1220-1230 not just 1220 as you've been saying. So next week it will be 1230-1240.
exactly
+100
call it for what it is..
CB are broke...
holding toxic assets in their portfolio, led by cratering sovereign debt and lifeless mortgage debt, unable to sell their rotten paper to raise much needed cash
they will sell gold.....LOL
"This shows that someone is consistently selling down the PM Fix and the amount of the cumulative sell down is almost perfectly linearly proportional to the cumulative amount by which gold trades up overnight. That can not happen by chance."
That's crazy talk. I heard on CNBC that no one wants to supress the price of gold, and they wouldn't lie to us.
The COT once again is showing record short positions by the "commercials".
Within days, we will here some announcement that the IMF, Bank of England. (fill in the blank) entity will be selling mass quantities of gold in order to raise cash for some other noble purpose, like bailing out some PIIGS bank or something.
Then, the F12-punching "gold hoarders" will be selling GLD en-masse and calling the CIGA Suicide Hotline demanding to know when the "physical will overpower the paper", yada, yada, yada.
It will be a glorious day. My mom will pay off her house with her earrings, and I will have less to worry about.
NASA won't be able to send any more probes though. Too expensive to source the physical gold.
NASA won't be able to send any more probes though. Too expensive to source the physical gold.
But gold is just a shiny trinket which has no real use whatsoever so I don't really get your point.
Heheheh yeah. You must work for the cartel. ;-)
In truth, a lot of people don't realize how gold is useful in high tech.
Gold is a storage of wealth. If you don't horde it then you don't the what the fuck your doing.
Robo, me thinks you inhaled a bit too much lead dust on your moms window job...
Better have those blood levels tested...
I would like to know the p value for Figure 3
Speaking of FIXED- I have a neighbor that could hold down one of these corrupt bastards with one arm and "fix" him with a dull Buck .
I just hope they can keep this game going for a while so I still have time to buy more (physical).
Starting with a better, or in this case more complete, historical record would inspire more confidence. In the 60's the big producer states like Australia capped the price from the miners and demanded that all sales went to the state. The tricks they've pulled with gold are infinite. If you can trade it, it isn't rigged in my book. "free" markets are a crock.
'How many graphs must an analyst show, before you can call a market rigged?
Yes and how many USTBills must the Fed Reserve auction, before they are devalued along with the PIIGS?
Yes and how many shorts can JPMorgan create, before they are forever banned?
The answer, my junior precious metals trader, is blowing in the wind, the answer is blowin in the wind.....'
If JP Morgan is super uber duper short gold, why do they make money trading almost every day and you don't?
It's much easier to make big winning bets when you have an unlimited line of credit with the house.
If JP Morgan is super uber duper short gold, why do they make money trading almost every day and you don't?
Isn't this a sure-fire way to know when the game is rigged? Your argument gets weak here.
No, the gold bug argument is weak.
It's essentially "I buy into a market that I say is rigged against me, and yet I expect the market to rise 4000%."
On one hand: The market is rigged against me.
On the other hand: I expect the same market to increase exponentially, even though I just SAID it is manipulated downward.
That's what is a weak argument.
Either it's rigged or it isn't. Either it's going up or it's not.
Yet it can't be rigged to go down and then go up 4000%. It isn't even logical to say both things.
You are using outliers to justify your position. Most people who buy gold aren't doing it to sell for a "4000% gain". We are doing it because we realize the FRN is quickly on its way out. I would say, at least, 95% of Americans have, at least, 95% of their wealth denominated in FRN's.
A roll of toilet paper will eventually be worth more, in terms of FRN's, than if you could make $100 bills with the entire roll.
You can have a market rigging for price suppression and the price still rising. You can also have a market rigging the price higher and the price still goes down(like a boiler-room type scenario).
If you bothered reading history you would realize that every fiat currency, since the beginning of money, that has run massive deficits has failed. There are zero exceptions. Some have pulled it off longer than others and the US has had one great run. We will most likely see a new and improved FRN at some point.
As long as there are trillion dollar deficits with low interest rates and massive fraud then the price of gold will tend to go up during that period.
Short-term, who knows.
Okay, let's say you're holding for a 25% gain....
How is that different?
You say it's rigged to the downside, but that it will appreciate. It can't be both.
Yeah, I'm sure that my house will be worth a billion gajillion dollars in 500 years too, probably around the same time TP is 100 dollars a roll.
You saying TP will be worth 100 dollars a roll is exactly the same as saying that gold will be 540000 an ounce (not even 54000, 540000). It's a 400X increase in the price.
You say it's rigged to the downside, but that it will appreciate. It can't be both.
Yes of course it can be both. Sometimes tethered horses slip their bonds and run away.
You got the goldbug argument exactly right.
Yes the market's rigged.
Yes gold's made us mega returns.
Our complaint is that we want it to become unrigged, so we can make mega mega MEGA returns...
We buy gold, and keep it because all else aint worth didly. Except love, cant buy that. Gotta be it, bring it.
Bravo, i bet you could sell a lot of cars.
I guess central banks keep all that gold around just in case their buddies don't want to trade for eggs or cigarettes or whatever...
Mr. Bravo, you make as much sense as a one-legged stool.
Assumably at some point desperation will set in and they will make a last ditch effort to make gold prices plummet to scare the common masses into selling it for fiat currency. The only question is when, and whether enough of the lemming populace has enough intestinal fortitude to hold on to their physical gold despite a plummeting price.
Who are "they" exactly?
Also, the drop in gold won't come due to manipulation. It will come due to its natural market action.
Who are "they"? You did read the article, right?
No, he didn't. It is contrary to his bull-headed, dollar-centric view. It's useless reasoning with the nerd. He is still in college! What can you expect. He has no world view.
Isn't this what cartels are for?
Poopdeville, you state (again),
"Sound money" is rentier money. Labor performed in the past is worth less than labor performed today.
I call bullshit on you (again). Labor has value only when it is performed. To devalue the money paid for past labor is to renege on the contract rate at which you persuaded labor to perform. This is fraud. And you need to look up 'rentier' again.
You are either a fool, a fraud, or a shill/troll (redundant choices?). Do you by any chance sell printing presses?
Wow. So many insults for a guy making logical arguments. And yet, I'll bet you cry to Tyler, saying he personally attacked you.
I thought he was the smartest guy in the thread, and yet you made several personal attacks against him without refuting his claim at all.
And yet, I'll bet you cry to Tyler, saying he personally attacked you.
Why do you always say that? Has Tyler given you a warning or something?
Yes. People cry to him all the time, saying that I personally attack them, when it is much more common that people personally attack me and others.
The proof is in the post above. Look how many times that guy personally attacked the other guy, when the other guy made no personal attacks.
I can't believe that people are crybabies on the internet like that, but that's the way it is.
I can take insults without having to "tell" on people. I'm not a pussy.
This is just more one sided garbage coming out of GATA. The above proves nothing. Maybe it's the overnight trading that is manipulated HIGHER? Which period has lower volume and thus is easier to manipulate? Overnight of course. Hmmm.
Who cares about Gold?
What century are we living in?
What millenium?
It's the stock market, stupid.
http://en.wikipedia.org/wiki/It%27s_the_economy,_stupid
Buy gold and silver and see what happens, hold on to FRN's and see what happens; who knows what will happen as we enter the Twilight Zone - it's your call, make it and get on with life for we live in interesting times -signing off from ZH forever - getting on with the things that really matter...
http://www.youtube.com/watch?v=NzlG28B-R8Y
Once again we are wowed with hearsay and the details get lost. The "quality" of this analysis is astonishing.
The 2.3% number quoted in here, and referring to the "Proof of Gold Price Suppression" 'article' is patently wrong if based on Adrian Douglas' analysis. His 'explanation' of why that number is the case, and cross-referenced 'proof' of this in that earlier post were laughable. I personally do not dispute the 'facts' represented, just his 'analysis' of the facts. It could be that there is a 'fractional reserve' situation. It could be that the 2.3% number is the real number. If the line of Adrian Douglas' analysis is true, then the number is not 2.3%. If it is 2.3%, then Adrian Douglas' analysis is wrong. Given the ridiculous relationship between the assumptions and conclusions, I have to assume it is the analysis.
There are "fixings" all over the world, not just gold. The LIBOR market is probably the largest, but stock markets have "fixings" too - it is called a close price, and in most markets it takes place with an 'auction'. Those fixings are the basis for index exclusions and inclusions. They are the basis for some investors to divest holdings. Bond investors use indices which are recalculated once a month, and they will allocate new money to investments tracking those indices (and their underlying bonds) based on index composition. Those trades often get made at closing prices so as to track the benchmark (because it is calculated off that price). The activities of the participants will often be "tilted" (because price-insensitive investors are generally going the same way). This is the way of the world. It happens in stocks, bonds, forex, and many commodities are traded. Gold is decidedly NOT the only one.
I do not know where the OP gets his "1 out of 2.6x1031" number. Somehow, because the rest of the analysis does not account for the time value of money, I assume this does not either. Anyone who buys on the close and sells the next day has to have the overnight capital, and VaR limits. Anyone who buys intraday and sells intraday, does not (within reason). It apparently also does not account for the drift factor of prices over nine years, which is even worse, as the drift factor of prices when prices have quintupled is actually quite significant. Is that drift factor supposed to completely have occurred between the AM fixing and the PM fixing? Is it supposed to have happened equally between the AM fixing and PM fixing? A quick analysis of the last 18 months on the Nikkei, which has both an AM close and a PM session close shows that the vast majority of the average daily movement shows up between one day's PM session close and the next day's AM session close. Since the recent high, the market has fallen 19.7%. During that time, the PM-->AM move has accounted for 19.6% of that change, and the AM-->PM move has accounted for 0.1% of that move. During that time, just over 50% of the time, the sign of the return between the two returns (PMDayN-1-->AMDayN and AMDayN-->PMDayN has been different, indicating a significant tendency towards mean reversion as the day goes on.
Using Figures like these to "prove" anything is difficult. Figure 3 is the same as Figure 2. Figure 4. If one assumes that there is a fundamental element in the price rise between PM fixing of DayN-1 and the AM fixing of DayN which is due, in part, to interest rates and risk premium of holding gold, AND the drift rate of price change, then Figure 4 is "proof" that prices close together in time are more closely linked than prices with the same time label (i.e. the two fixings yesterday are more closely linked than yesterday's PM fixing and the PM fixing of four years ago). When prices rise 5-fold, it is pretty much a foregone conclusion.
As an investment case, I find Figure 2 interesting, and possibly compelling, but what it means is that in any bull market, the overnight gain is more important than the intraday gain. This has been studied and beaten to death in many, many markets. What it tells you is that, without accounting for the risk and interest cost of holding gold overnight, prices give back roughly a third of their gain between the AM fixing and the PM fixing.
All of these numbers are without fees and commissions, and assuming you trade twice a day (selling yesterday's buy at today's AM fix, and buying today's PM fix), over 9 years, that is approximately 2200 days and 4400 trades, which means that the arbitrage (assuming you also sold forward gold so you could isolate the PMDayN -1 to AMDayN spread) is quite expensive. I don't know gold commissions but I have to expect they are above 25cts/ounce, which would pretty much eliminate any gains.
None of this to say that the gold market is not fixed/rigged/manipulated or anything else bad. I would only point out that Adrian Douglas' analysis is not the "proof" of such.
wow, finally some sanity on zh. You have more patience than i do.
would you all please quit feeding the troll. this stupid fuckass is paid to stir shit and you are falling for it.
IGNORE IT
I gotta earn my 8 million dollar salary as the vice president of JPM, don't I?
LOL
What did I tell you guys?
The only Investigative Journalist Rolling Bearing on the planet.
Or maybe your 26 000 per annum his secretary's secretary's copyboys assistant?
as the vice president of JPM ? Isn`t it snooki ?????????
"You're so vain...I bet you think this post is about you."
What I've learned from posting on zero hedge today:
People will pay 8% above the market price for a commodity, and think that they are making a good decision.
People do not value a business school education, and even ridicule it on this site. When you ask them what education THEY have, you get *crickets chirp*
People say that the gold market is rigged to the downside so that it cannot rise, and then in the next sentence make the claim that it will rise.
People make a lot of personal attacks against me, yet are crybabies to Tyler when I respond to said personal attacks.
People misrepresent what I said, even when they reproduce the post that shows that they are misrepresenting what I said.
ColonelCooper knows which truckers he can blow for money.
Johnny - please learn this one someday “If you do what you've always done, you'll get what you've always gotten.”
I prefer "To thine own self be true", but since he doesn't know who he is that is going to be difficult.
stop playing with your food :)
Mine's bigger
johnny..if youre lucky you will come down with a serious case of Alzheimers .....and forget how stupid you are...anyone with a common sense one notch above yours..that would be zero..knows the market in precious metals are manipulated..anyone with an IQ north of yours...that would be 7...knows that gold and silver will go way up in this next crash....back away from the mirror you narcisstic non evolutionarist moron...when you wake up one day and realize what an ass you are..make sure you post it here....the truth will set you free...
For members, Jim Willie's latest edition of the Hat Trick Letter was posted today.
http://www.youtube.com/user/MaxKeiserTV#p/f/0/GZ2swdKWbHE
A fascinating read, but might the divergence in intraday and overnight price action be caused by a much simpler reason: The world's largest gold producers are based in Western hemisphere (ie Barrick, Newmont, etc) and run their physical sales operations during their daytime hours, whereas substantially less gold production (into the public markets) occurs in Asia. As well, daily production figures in the western hemisphere come through during intraday hours, giving hedging desks the necessary volume info they need to sell.
The lopsided time-frame of buying and selling tells that gold mining may be largely "West->East" trade, up to now at least.
"if the major oil companies were to meet each day to “fix” the price of crude oil"
Does OPEC ring a bell??
Once again Johnny 'I hate gold' Bravo spends all day posting crap on a gold related thread, meaning everyone else has to scroll through dozens and dozens of examples of his inane ramblings and, unfortunately, responses by others trying to inform this poor benighted fool. Seriously there are about 200 posts on this thread as I write this and nearly half of them consist of nothing more than JB expressing his childish opinions and others fruitlessly arguing with him.
I would like to propose a global 'No troll feeding' policy specifically directed at JB on any gold related thread, as he is drowning any and all gold discussions with his inanities and, indeed, subverting the comments section from a discussion of the article in question to a school-playground level of bickering.
Dissenting voices are always welcome in any discussion when well-informed and genuinely seeking truth, but JB has nothing to say that he hasn't said a million times before, and attempting to educate him is simply casting pearls before swine.
Anyone else in favour of a ban on Troll feeding?
I have posted comments along this line before and will say so again... much of tha analysis in this paper is quite poor.
For instance, Figure 4 regresses a cumulative series on a cumulative series. Of course there is going to be a strong linear relationship!
A better approach would have been to regress the log of holding-period returns... but I just did this with the same April 2001 - Aug 2010 LBMA data and found a coefficient not significantly different from 0 and a nearly 0 R-sq.
Further, the analysis does not consider the overnight costs of financing the long position in gold and other transaction costs. Very simply, should the transaction costs be on the order of even 2 basis points then the trading strategy is no better than buy and hold.
So, be careful how much faith you put in this paper.
Figre 5 is non-sense too. Try plotting the open and close of the S&P500 (or any index of your choice). Is there a visible difference in levels?
I don't how the probability of Up/Down was calculated but it looks fishy to me as well.
Assuming a 2301 flips of a fair coin, the probability that there are at least 1150 heads is 50%. The probability of at least 1,300 heads is 2e-10.
But, if that coin is not fair and has a probability of heads of 54.5% the probability of 1300 heads becomes 2.5%.
Given that our sample includes a time period where the price of gold has increased from $250 to $1200 and given that there is an overnight cost of carry, we already know the coin is not fair and the paper's calculated probabilties are nonsense too.
Further, why would we expect the number of up and down days to be the same? What happens if a stock goes up by 1% on 2/3 of the days and down by 2% on 1/3 of the days. As long as these days are not predicatable there is no arbitrage here. So why would we expect the gold market to be symmetric?
FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA
FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA
FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA
FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA FOFOA
Got gold and FOFOA, Bitchez?
http://fofoa.blogspot.com/
Come on, people. I am a long time lurker and come to this site not only for the stories, but for the comments section. I can't understand how so many intelligent members of this site get sucked into meaningless arguments with Johnny Bravo. Please, stop feeding the troll.
Sigh. I miss the old days where I learned just as much from the stories as I did from the comments section. Let's clean it up, shall we?
so let me get this straight.
The gold bugs/survivalists think:
1 markets are manipulated by 'TPTB'
2 we are all doomed and should be stockpiling guns, ammo, food
3 physical gold is the only way to own gold
Sooo...we have corrupt, powerful governments (let's not even get started on the trilateral commission and the CFR etc), and the world is quickly going to go to hell, so what do you do?
Buy "gold" on the internet (!!!) and then brag about it day after day in the most public way possible.
Gee, what's wrong with this picture?
If the manipulation is so easily and reliably detected, short AM fix, cover at PM fix, be happy with your increasing balance, buy physical with the profits.
Or was the whole purpose of this just to find imaginary bogeymen to blame for your gold not rocketing to the moon yet?
pasted elsewhere
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