Guest Post: More Forensic Evidence Of Gold & Silver Price Manipulation

Tyler Durden's picture

Submitted by Adrian Douglas of Market Force Analysis

More Forensic Evidence of Gold & Silver Price Manipulation

In two recent articles "The Gold Market is not "Fixed", it's Rigged" and “The Failure of the Second London Gold Pool” I showed how the gold trading between the London AM Fix and the PM Fix was unnaturally related in an inverse way to the trading between the PM Fix and the following AM Fix. I calculated that the probability of such a counter-intuitive correlation existing by happenstance was one in 2.6 times ten raised to the power 31. This is almost irrefutable evidence that some one is continually and deliberately dumping gold into the PM Fix to suppress the price of gold.

In this article I have unearthed even more forensic evidence in the form of a correlation between the gold and the silver price which again could not happen by random chance. It is necessarily a result of deliberate market intervention and what’s more it occurs on a continuous basis.

The fundamentals that drive the supply and demand of any commodity are so different from one commodity to a next that we would not expect there to be any mathematical relationship between their prices. For example let’s consider gold and copper.

Figure 1 Cross-plot of Copper versus Gold 2001-2010

They are both metals but that is where the similarity ends. Copper is used in many industrial applications for its superb electrical conductivity properties but also it is used for water piping because it is non-toxic, durable and corrosion resistant. Gold on the other hand has almost no industrial uses and is used for storing wealth as an investment and in jewelry fabrication. One would expect that there would be no long term correlation between the price of copper and the price of gold.
Figure 1 shows a cross-plot of gold and copper prices from 2001 to 2010. It can be seen that there is no discernible mathematical relationship between the prices of these two metals. The cross-plot of prices looks like someone randomly fired a machine gun at the chart.

Gold and silver are also two metals that have very different supply and demand fundamentals. Only about 10% of mine supply of silver is used for investment purposes while 90% is used in industrial processes from photography, electrical soldering and wiring to batteries and medical applications. One would expect that like copper there would be no particular relationship between gold and silver.

Figure 2 Cross-plot of Silver versus Gold 2003-2008

Figure 2 shows a cross-plot of silver versus gold from June 2003 to September 2008. This chart is absolutely shocking. It shows that gold and silver prices are almost perfectly correlated with an R squared value of 0.96 (1.0 is a perfect correlation). The best fit line to the data gives the relationship that

POS= 2.23*POG – 253…….…eq(1)

This means that silver prices in this five year period did not move with respect to the very different fundamentals of silver; they were entirely determined by the price of gold! If I had been on a desert island between 2003 and 2008 you could have called me on the phone and told me the price of gold and I could have told you what the price of silver would have been on that day. Let’s demonstrate it.

Let’s take today (September 21) back in 2006. The price of gold was $582.2. From the equation the silver price should be 1045 cents/oz. It was actually 1083 cents/oz so the synthetic price calculation based only on the gold price agrees within 3.5%.

Figure 3 Cross-plot of Silver versus Gold 2008-2010

Figure 3 shows a similar cross-plot but this time the data is from September 2008 to September 2010. It can be seen that yet again there is almost a perfect correlation between the price of gold and the price of silver. In this case the relationship is given by

POS= 1.92*POG – 431…………..eq (2)

Figure 4 shows the data set from June 2003 to September 2010 on the same chart. The two distinct correlations are shown with the black and green lines.

Figure 4 Cross-plot of Silver versus Gold 2003-2010

I have already demonstrated in previous articles that the price of gold is suppressed. What this chart demonstrates is that not only is the price of silver manipulated and suppressed but it is done so almost perfectly algorithmically. What can also be deduced is that the price of silver was creating a problem to the manipulators in 2008 so they hammered it down and subsequently instigated a much more aggressive suppression on the price of silver. This can be seen from the fact that since 2008 the correlating line (green line) is below the pre-2008 relationship (black line) and also sports a lower slope. Had the same pre-2008 algorithm been maintained until today the low for silver in 2008 would have been $14/oz and the price today (9/21/2010) with gold at $1288/oz would be $26.19/oz when it is only $20.90/oz.

In figure 5 the two equations eq(1) and eq(2) have been used to generate a synthetic price of silver from June 2003 to September 2010. This is the red curve on the chart. This curve is only derived from the price of gold and the correlation equation. There is no input of the price of silver. The real price of silver is charted for comparison and is shown in blue. What is really astounding is that one can generate almost a perfect reproduction of the price of silver by only knowing the price of gold. This is again “smoking gun” forensic evidence that the price of silver is not only manipulated but is done so algorithmically.

Such a perfect relationship with gold could not happen over a seven year period by pure happenstance. The silver price is completely false and has absolutely nothing to do with the fundamentals of silver.

Figure 5 Real & Synthetic Price of Silver 2003-2010

In figure 6 the price of gold and the correlation equations have been used to generate a synthetic gold to silver ratio from June 2003 to September 2010 which is shown in red. The actual gold/silver ratio is also shown. It can be seen that the two data sets match very well. This shows that the ratio only depends on the gold price because this is the only information that was used to generate the red curve.

Figure 6 Real & Synthetic Gold/Silver Ratio 2003-2010

This is simply an outrage. The bad news is that for the last seven years those who have been expecting silver to outperform gold or to march to its own drum have been sorely disappointed and it was hard wired into the trading that they were not going to see a freely traded silver market. The good news is that from the way silver has traded in recent days it is decoupling from gold. It is breaking the algorithmic shackles placed on it by the manipulators. There is not enough data to see this definitively in the cross-plots yet but it should be evident very soon. The artificially low price that has resulted from the creation of false supply through the sale of paper silver via unallocated accounts as a substitute for real bullion has led to a growing shortage. This monumental scam is in the process of becoming unraveled as investors insist on taking delivery of real silver.

Forward sales of silver through the LBMA OTC London market are approximately 8.5 Billion ozs. This is almost all the entire global reserves of silver that are yet to be mined! But the silver miners who own the remaining reserves are unhedged, so who ever has sold 8.5 billion ozs of silver forward by inference does not own 8.5 billion ozs of silver. It is a naked short position of 11 years of global production.

The interesting question is what will the free market price of silver be? Gold itself is suppressed by many multiples of the current price and the false silver price is just a derivative of a false gold price. I have previously estimated that there is only one ounce of gold for every 45 ozs that have been sold. If a similar relationship exists in silver than the eventual long term free market price target could be more than $900/oz. This is just a wild estimate but I think it is safe to say it will be many multiples of the current outrageously suppressed price of $20.9/oz.

Adrian Douglas

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Horatio Beanblower's picture

Great analysis, Adrian.


CNBS: Orange juice is up!  Take that, gold!

B9K9's picture

Sort of OT, but does dovetail somewhat into the topic of gold and the doomed $USD. I regret not getting a chance to reply to this comment by Shameful on a now stale thread:

I disagree about the importance of the USD. (In terms of maintaining power - the power-elite can simply change hosts. ed)


Big changes in society just don't happen without chaos. 


I'm inclined to think that real money would be made by riding the new empire on the way up, or sell the empire on the decline.

Excellent observations - I feel like the 'real' conversation (that is, the end of the $USD, USA empire & identifying new areas of opportunity) is finally moving in the proper direction, and regret not having a chance to reply last night.

First of all, nobody likes change. That includes the Fed and the power-elite who are quite comfortable with the present status quo supported by the $USD. That's why so many people mistaken think/thought QE is/was an attempt to actually liquidate insolvent institutions and monetize the debt.

Nothing could be further from the truth! First of all, from a logical standpoint, at a 5/95 ratio, they could never hope to create enough new base money to offset the huge leveraged balance of private credit. So QE really was all about re-charging organic credit growth; hence the stock market run-up, gold suppression, endless propaganda, etc.

OK, so the power-elite tried to restore their present position underlying the $USD, but failed. What next? Well, this gets back to your observations: does one short the failing empire and/or go long the new, emerging empire? I would suggest both.

Domestically, it is clear (at least to me) that the is going to once again take over base money creation and regulate private credit. They will need to do this just to keep government running - if the Fed doesn't go along, then they'll just usurp the present function (Trav7777 portrayed it as parking tanks outside) or create a new greenback.

Either way is highly inflationary; actually it's hyper-inflationary, hence gold. And as you state, it won't be a smooth transition, rather it will be all out civil war, which explains my admonishment to "get out now". As to the Fed, I would imagine they have this completely game played - I mean, I always laugh when someone postulates they don't know what's going on.

So, as to option two, going long the new emerging empire, this is clearly China. The power-elite, while certainly comfortable in the present host (USA), have thousands of years of experience in these kinds of situations - they can read the signs. They are not going to want to be around when the SHTF + they want to get in on the ground floor of the new powerful host.

Quick recap:

The $USD is not critical to the equation underpinning the imperative of constant loan growth. Any monetary vehicle can do, but it's still hell even for the power-elite to get off their duffs and make the move.

Transition isn't clean - rather, it entails choas and perhaps civil war. Do you really want to be around when this fucker explodes? The US has been suppressing building class, race & regional resentments for decades. The blow off is going to be epic.

Ride the short ($USD) - go long gold. Ride the long - go long China.


fiddler_on_the_roof's picture

good read. I agree with your "Ride the short ($USD) - go long gold. Ride the long - go long China", but I would not go short USD now, wait till Jan 2011. I expect some fireworks, though I could be wrong.

Diogenes's picture

"Orange juice is up!"


But sugar is down! Someone is manipulating the marmalade spread!

SGTbull07's picture

Here's Adrian Douglas in his own words:

MUST WATCH:  The Curious Case For $936 Ounce Silver

Troy Ounce's picture


Can I safely assume that september 14th was the date the cartel started pissing on their shoes?

Ripped Chunk's picture

LMBA is being raided of physical gold. Jim Willie of has a recent interview with "On the Edge" with Max Keiser where he talks about some of the background battles that are heating up in the bullion world.

Here's the 3 part interview:

wafflehead's picture

with the price of gold skyrocketing i cant even wear my gold chain anymore. I am afraid of getting robbed at gun point

Horatio Beanblower's picture

Mr T is now living inside Ft. Knox.  Mr T IS the gold standard.

Attitude_Check's picture

Why do you seem to have to be such an as**ole?  Sometimes you actually have intelligent comments, and then you make dumb-ass comments like this.  What is your problem - forget to take your meds sometimes?'s picture

you know i have never been an ahole before, starting to like it actually. i am telling people off in the street that try and approach me to sell/sign/solicit something to me. stop harassing me. i don't have to talk to you and i don't want you to talk to me, so there.

fiddler_on_the_roof's picture

In India Gold chain snatching, I believe has gone up atleast 1000% since last 2 years. Now women folks are turning to Rold Gold chains.

wiskeyrunner's picture

The low overnight in the Dow Mini Futures was near 10650, so we will rise to 10750 before 3:15pm cst. Just watch and see. With out fail it moves 100 points a day 99% of the time.

hdunn2's picture

of course. Not Dow, but got a good laugh at the q's this am. We had adobe and a few other negative headlines, come into the open down half a %, AAPL proceeds to rip up and carries the q's into positive territory. 

scratch_and_sniff's picture

Anyone know if the POMO is expected to be significant today?...last one was huge, are they likely to repeat that in a hurry?

fiftybagger's picture














Horatio Beanblower's picture

"JP Morg & Friends" ARE the government.

mrgneiss's picture

Ted K you're an embarrassment to Zero Hedge.  Go back to the Yahoo financial blog.

mrgneiss's picture

Ah, my fault!  I didn't know the junk level had been raised to 50!

I thought it was just infinite now.  Now that JB is gone maybe 20 will be more than enough.

Turd Ferguson's picture

Wow, Theodore. Do you get tired of having to clean the sand from your ears and eyelids every day?

EscapeKey's picture

No, and the Fed MOST CERTAINLY don't artificially support the FREE MARKETS either.


A_MacLaren's picture

Drink some coffee and read or listen to the words of Central Bankstas.


Paul Volker:

"It was probably a mistake to allow gold to rise so high."

"Letting gold go to $850 was a mistake."


Alan Greenspan on gold:

“... is the canary in the coal mine. It signals problems with respect to currency markets.”


Debt-based-Fiatistas know their time is coming to an end.

truont's picture

Alan Greenspan in 1998:  “Central banks stand ready to lease gold in increasing quantities should the price rise.”

A_MacLaren's picture

Thanks for adding.  I knew that one had been spoken in the past, but couldn't summon the quote.

Here's another gem:

“The last duty of a central banker is to tell the public the truth.”
Alan Blinder, Vice Chairman of the Federal Reserve
… stated on PBS’s Nightly Business Report

So when Ben Bernanke says:

“Well, the signal that gold is sending is in some ways very different from what other asset prices are sending. For example, the spread between nominal and inflation index bonds remains quite low, suggesting just 2% inflation over the next 10 years. Other commodity prices have fallen recently quite severely including oil prices and food prices. So gold is out there doing something different from the rest of the commodity group. I don’t fully understand the movements in the gold price, but I do think there’s a great deal of uncertainty and anxiety in financial markets right now and some people believe that holding gold will be a hedge against the fact that they view many other investments as being risky and hard to predict at this point.”

Either he is being disingenuous, or he is the CONfidence Fiatista's Fiatista

tmosley's picture

Wow, in the face of overwhelming evidence of manipulation, this is hte best you can come up with?  Handwaving!  

Now, if the correlation was perfect and had never changed, then one might have said that it was natural, but with one sudden change like that in the face of no structural change in the market, it looks totally artificial.

RockyRacoon's picture

I junked you because you are stupid.

You have learned nothing here after 1 year 11 weeks.

Cognitive Dissonance's picture

Some people have nothing to learn because they know everything. Rock solid beliefs and conviction of purpose works wonderfully when charging machine gun nests and looking in the mirror.

Hum, who is that handsome raccoon? :>)

NotApplicable's picture

For those who believe, no explanation is necessary. For those who do not believe, no explanation is possible. -- Anon.

iDealMeat's picture

+1 to you Coon..  Claiming your junks is admirable.

RockyRacoon's picture

I never junk 'n' run.  It's only polite.

Ripped Chunk's picture

Ted is on his way to 40 junks. Anybody? Anyone? Bueller?

Later:  He's at 45 can we see 50?  50 anyone?

DaveyJones's picture

Ted Kennedy is back from the dead! No wonder the statement makes no sense. Ted, now that you're "off limits," can I ask you something about Chappaquiddick? 

Justibone's picture

Gov't and big banking interests are correlated, with a p-value well north of .95, if one were to put a number on it.

New gov't (ditch the elitist scum) and watch for a gov't-bank decoupling.  Future-woot!

Confuchius's picture

To Ted K;


Perhaps you might take the bag off your head once a year...


Tell us all you know about government intervention...

JohnG's picture


You should give up trading and go help some more retarded persons.

Turd Ferguson's picture

Again, Adrian provides great, great stuff. I waited and waited however to get to the crux of the matter and here it is:

"Forward sales of silver through the LBMA OTC London market are approximately 8.5 Billion ozs. This is almost all the entire global reserves of silver that are yet to be mined! But the silver miners who own the remaining reserves are unhedged, so who ever has sold 8.5 billion ozs of silver forward by inference does not own 8.5 billion ozs of silver. It is a naked short position of 11 years of global production."

This is the moment folks like Adrian and Harvey have been waiting for. The Comex is broken. It is shattering into 8.5 billion little pieces. If...and its truly a big if...the silver comex can forestall a collapse this month, they will only be postponing the inevitable. If not now, then November.

Do not monkey around with this. Awareness of the massive fraud that is the Comex will have global financial implications. Buy physical. Buy miners, they will surely move swiftly forward, too.

BearOfNH's picture

Adrian is normally the male spelling. My sister uses Adrienne (OK it was actually her parents who spelled it that way, but they were educated).


Al Gorerhythm's picture

Why? Do you want to trade fashion tips?'s picture

no, i like to interrupt female or male writer. cause yves smith was on MAX KEISER last night. i didn't listen to them, cause i like to watch how M A X talks with his hands. he is very articulate fluently with hand gestures. so does stacy. i like to see that, passion in the words that speak and meaning coming from both hands and mouth. i didn't like yves hair up, though. she is pretty.

not like some people, i know†