This page has been archived and commenting is disabled.
History Repeats Itself: Silver Futures Manipulation in 2011 Mimics Gold Futures Manipulation in 2008
Above, we see a continuous 48-hour chart for silver from May
10 to May 11, 2011. You will notice that in Asia, on May 11, from the previous
close on the New York Globex, silver futures rose nearly +2.5% . Then, after
New York opened on May 11, silver precipitously tumbled to a low of $34.87,
more than an 11.4% drop from its high in Asia just a few hours prior. Look
familiar? It should.
The patterns in the silver futures market now mimic the
exact manipulation patterns that manifested in gold futures during a 12-14 week
period from July to October in 2008. During this period in 2008, gold exhibited
flat or slightly rising behavior in Asia and then waterfall declines at the
open in New York that took the price of gold during a 24-hour trading period
consistently 2%, 3%, and 4% lower in New York from the highs in Asia on a daily
basis. You may see all the charts I produced of these anomalies in gold futures behavior in
Asia/New York during that period as well as my correspondences with the
CFTC regarding this behavior here. Initially, the CFTC responded to the huge
same-day anomalies in gold futures pricing between Asia and New York that I
sent to them by stating that “the Chinese gold market is not a free market” and by implying that manipulation only occurred in Asia to drive gold higher every
day while the New York gold futures market traded freely. Coincidentally, during this period of great anomalies in gold futures prices between Asia and New York, back then, as is the case with silver today, physical gold demanded much higher premiums over the daily low prices of paper gold established in New York, and this divergence in physical/paper prices did not usher in gold's final gasp and a collapse in gold prices as many are predicting will happen with silver today (gold was trading in the low $800s back then). The only difference in the manipulation of paper silver now and the manipulation of paper gold in 2008 is that the bankers seem to now be intervening not only in London/New York now but also in Asia on select days to take advantage of the thinly traded Asian market to take down silver futures markets by executing a waterfall decline in minutes in the East on occasion as well. Still, from high to low, the prices of silver futures are consistently lower on a daily basis when trading in the West versus when trading in the East.
In response to the CFTC's allegation that these futures price discrepancies were centered on "the Chinese gold market [not being] a free market", I sent the CFTC the following questions for
further clarification back in 2008:
I am aware that Chinese markets are very highly regulated
but that does not necessarily mean because the market is smaller and less
liquid, that this market is the one being manipulated to a greater extent than
the one in New York. To address this issue, I only have two further points
(albeit long ones):
(1) According to Zhang Bingnan, the Beijing Gold Economy
Center President, “Gold prices in China should be 1 yuan a gram, or more than
$4 an ounce, higher than the overseas market on average. The premium is a
result of the spread between bids and offers in different bullion markets and
the exchange rate.” Is this a reasonable statement to you, or are there perhaps
other reasons that explain why the premiums are so vastly greater in Asia’s
futures markets for gold than the $4 an ounce premium that Zhang Bingnan stated
should be the reasonable expectation? The spreads for the past 10-12 weeks have
consistently been $30, $40, $60 and even as much as $100 an ounce between the
highs in Asia’s futures markets for gold and the lows in the New York futures
market for gold [on the same day].
As I inquired in my previous message, can you let me know if
American banks or investment firms are using these huge arbitrage opportunities
to enter and exit short futures contracts the same day or within a 48-72 hour
period over and over again? If I am not mistaken, the CFTC should have access
to this information. If this has indeed been occurring, would it be
possible to let us know who these firms are, and if not, is there any reason
why this information needs to stay secret? If this has occurred, while not evidence
of manipulation, would this not be evidence that arbitrage opportunities are
being leveraged to earn enormous profits in a manner inconsistent with the
reasons why future markets were established? And would this not be grounds for
further investigation?
(2) Secondly, Mr. Chilton, you stated to me that
manipulation is most likely occurring in the Asian gold futures market and not
in the New York futures market. If this is the case, then why are the spot
prices established in Asia much closer to the prices of gold established in
physical markets than the spot prices established in New York? Right now, there
seems to be four different markets for gold. The spot price in Asia, the spot
price in New York later that SAME DAY, the price of bullion (which is often selling
at significant premiums over spot) and the price of gold coins (selling for
even a more significant premium over the spot price).
While I do understand that soaring demand for physical gold,
both bullion and coins, are setting higher prices for purchase of physical
(real) gold than the prices in paper markets, I still believe that this begs
the question of “what is wrong with the price of gold in the paper COMEX
markets?” Perhaps I’m unaware of previous occurrences of enormous
price spreads of this nature between physical markets and paper futures markets
and this has happened before with some reasonable explanation. If you may be
able to provide an example to me of previous times in history when spreads of
15% to 40% existed in physical market prices over the prices established in
futures markets for the same commodity or asset, then perhaps it will help me
understand what is going on with the prices of gold in the COMEX markets. My
quest really is to understand the anomalies that seem to still be occurring
between the price of gold in the physical markets and the price established in
the COMEX paper futures market.
After I sent the above series of questions, the CFTC stopped
responding to my communications. So does the recent behavior and anomalies between
silver futures prices in Asia and New York and the large premiums that have
existed between physical prices over paper prices all throughout this silver
correction surprise me? From what I observed three years ago in the gold
futures markets, not one bit. As I stated here, seasoned gold and silver
investors understand how to trade around this manipulation and we will continue
to do so until this manipulation is broken once and for all.
About the author: JS Kim is the Founder and Chief Investment
Strategist of SmartKnowledgeU, a
fiercely independent investment research, education, and consulting firm
dedicated to protecting its clients from the fraud of Wall Street.
»
- advertisements -
all hard boiled mantras are wrong. There is no truth on this roller coaster ride. Hang in there its going to be Oligarchical game of false mirrors for all the period through summer!
I get a kick out of the nickel queezers at Zero, the silver and gold market is so small that it is easily manipulated by the BIG money. They can manipulate it anyway they want. They can take silver back to $16 and keep it there if they so choose.
Ebay is best spot silver indicator. Last night I checked '5 eagle coins' at $226, so 1 oz at $45 but Comex at $33. This is ridiculous. If you can get paper price and sell into spot price, there is $10 profit.
The $45 doesn't include S/H. Even wholesale you can't get physical for under 38.
Why is SLV down X, ZSL up X and AGQ down 3X?
So where is the bottom here - how far do they have to push silver down before the shenanigans stop? $20? $12? $8?
So, is Monday when the new Hong Kong exchange opens up?
The bottom is zero, when the COMEX defaults, and paper silver is found to be unbacked and totally worthless.
Of course, the premiums on physical have, are, and will continue to explode. Owners of physical will lose nothing. In fact, they will be on the receiving end of the flight from the hyper leveraged paper products.
“the Chinese gold market is not a free market”
That right there tells you they feel like they are fighting the Chinese market on some level.
as opposed to our fully free and unfettered markets......lol
Good article, I agree with it. The truth will not be known till the mechanism is smashed.
General Jim
James Turk
Eric King
All got taken to the cleaners with their noses rubbed in Infinite Fiat.
I agree. Jim Sinclair never seems to utter a negative word about gold. He doesn't censor negative opinions but he just continues to pump. Blah blah 1680 blah blah 1680..........
Why do we waste our time on robo - somethings are probably better ignored.
It's hard to ignore the turd that one just stepped into.
And the blinkered, ultra and terminally short-term-obsessed, venal, disingenuous, amoral, power-worshiping, pro-corruption, pro-Establishment, cowardly troll chimes in once again, to drop his shitbomb antagonizing comment before running away to hide behind his mama's skirt (or his basement keyboard and monitor, as the case may be).
RobotLemming, fuck off and die --- you add NOTHING of value to this forum. Nothing.
The AUDUSD pair has reached and breached a major Fibonacci level and looks to reverse higher. This should be the bottom for precious metals in this round and they should move from here to all-time highs, particularly silver.
Watch the AUD pair to top out at about 1.15 to the USD. That level will show the top in PM prices before years of retracement. Coming is the biggest set of blow-off tops in the history of trading.
Or not...
:D
Robo, your precious Minefinders is down 25% since your rec, anymore winners?
fuck you
I want to buy CFTC.COM and turn it into a porn site.
fuck them all
the crooks are regulating the crooks
wake me up when they've all blown themselves up
for you Marty Armstrong followers (if you haven't read it yet) and even you Silver nuts. Yes things do go bump in the night. You found that out this morning when you went to kitco.
The cabal handed alot of people their heads this morning on a platter.
http://armstrongeconomics.files.wordpress.com/2011/05/armstrongeconomics...
Yes, your right about that "bump" and I don't give a fuck. I've bought at 13, 15, 17, 19, 21, 33, 35, and 37. Guess what? I'll buy on the way back down too. Am I a clown, (cheap shots welcomed) maybe, but I know and I think we all do that it will always be worth something. Also it has to go below $20 for me to start losing. But fuck it, I'd rather gamble with hard assets.
Why can't you just admit that this is speculative volatility. Yes, the biggest players will aim to move the market but they do so in every asset class.
Because, as reported ad nauseum on ZH and elsewhere, speculative interest was at record lows in the recent run-up in metals. Also, large players with excessive concentrations of positions pushing the futures market about in defiance of the real producers and consumers of the underlying commodity is known commonly as 'Market manipulation' and is illegal.
If they did admit it then they would just like the cabal they purport to fight against. That wouldn't be nice to know you are fighting against a cabal that actually includes yourself. In fact many have morphed into an evil empire of deceit and lies to further theri own investment objectives. All under the guise of kinship.
One could argue given the types of responses people provide here and the venom that is spewed that this has in fact become the cabal and those of sound reason who question the questioners are silenced since the pumping troll cabal dominates here for their own well being not the common good.
Hopefully the pumping trolls who pumped to 49 bucks had their fucking heads eaten in this downdraft and we can get back to what was an objective of destruction of the Squid and Morgue by using silver and gold as a substitute for fiat.
We were interupted by insanity and glowing eyed profiteering on the part of select group of ZH'ers.
Asshole. You must be from Toronto. If one was a trader like you then your advice was very precient. But as far as I can tell most here are wealth preservers and hold phyical for that reason. Trading can cause significant decreases to one trading account especially when listening to garden variety brokers and snow boarding shoe shine boys. So you are telling people here to take up trading which is inherently more risky than the "hold physical" strategy currently employed.
It is not in the CFTC's interests as a regulatory agency of the United States government, which is the primary beneficiary of supressed precious metals prices, to address the issue. Perhaps you would have better luck with the Chinese regulators, as they stand to profit the most (as the worlds largest gold producer) by the termination of US government domination of the precious metals market.
update JBSICA for UR: Still no physical in my hand
Also - Blue Horseshoe loves Anacott Steel.
dat sux. Sorry to hear it.
The Chinese do not export any of their gold. It is all consumed, if that is the correct word, internally, together with the 500+ tonnes of gold they imported in the most recent year.
The Chinese have every incentive to target lower prices for Gold and Silver to enable them to diversify out of dollars and into metals at the best exchange rate.
So the US banks that are massively short gold want lower prices, and the big buyers in the East also want lower prices. This situation will persist until the excessively low prices make the metal unavailable, which is the inevitable result of such attempts to fix prices.
They don't own their own mines, but by law they get 100% of the gold which they buy below market but in turn the mine and miners get good pay and a guaranteed market. From a lecture I saw they produce about 300 tons/year but need about 3000 tons to back their currency and be on par with the U.S. Their mines are expected to run out in about 4 years, as well.
However, I think the bigger point is that they mean to have a stronger currency and avoid being dragged into a fiat disaster by the U.S. and West, in general. Good planning if you ask me.
They've been at it for years. The financial market infrastructure building started after the 2008 crisis is almost completed. I wondering how long they will continue to import the US's inflation and accept a lesser public seat than the US? The conversion will cause some domestic instability in China regardless of when it happens.
btw, just to prevent any "sour grapes" comments, please refer to the link in the last sentence about how "seasoned gold and silver investors understand how to trade around this manipulation". we have no "sour grapes" syndrome as we employed a number of extremely profitable hedges for our clients over the past couple of weeks against this manipulation by shorting silver, silver shares, gold and gold stocks. We may earn profits to the downside as well when these corrections happen, but it doesn't mean that the manipulation and the lack of free markets in gold/silver does not bother us tremendously.
If one tracks the daily CME bulletins, one will discover that the percent of settlements in PM futures contracts in EFS and EFP transactions has literally exploded in an unprecedented manner over the past several months. For example the April 29, 2011 daily bulletin illustrates that EFP and EFS daily settlement totals in gold were 11,101 contracts while physical settlements, month-to-date, were only 1,961 contracts and cash settlements, month-to-date were only 19 contracts. The situation for silver futures settlements was even more skewed towards EFP and EFS settlements and away from physical settlements (percent wise). The fact that the percentage of settlements as EFP and EFS transactions have exploded and dominate the percentage of daily settled transactions in PM futures should warn us that something is severely amiss with the PM futures markets.
No expert on this matter but I would have to agree that if more and more transactions are being settled with "paper", the pressure on the physical side has to be extreme. But I have a question (for a novice such as myself). What happens after the settlement with EFS and EFPs? What pattern are you seeing with the recipients of the parties receiving these as settlements? Also, can a third party actually force physical delivery (e.g., a company that actually needs physical silver/gold for their business) or in the end, is basically everyone subject to a cram down if physical is not available? Any thoughts would be appreciated.
the $ZSL trade has been profitable recently but don't hate the 'playa' - hate the game.
what we see now are market decouplings, like brent/WTI, mostly engineered by WS ... foreplay for further global capital and trade wars
If a market is privately owned it can set its own trading rules. I am not a professional trader so the daily arbitrage of the bigger and smarter players does not interest me and I cannot game it. I buy for the long haul and trends.
Arbitrage or manipulation or gaming the system should still not be able to change the long term trends of what drives metals prices higher, namely more currency, large deficits, irresponsible governments and the general historical deterioration of fiat currencies. Physically holding it is best. I personally think stocks are second and paper gold/silver is last.
If I were king of the commodities market or owned it I think I would be tempted to limiting trading to those people who actually make or want to take possession of the products. You want an honest market price that reflects supply, demand and even price stabilization without casino type traders making bets. Financial houses and day traders could not play except as the agent of a buyer or producer.
I'm sure you'd agree then that the trader who is short a commodity has to come up with the goods, like the original trades were supposed to work. Miners should be able to offer their metals to the market when they have sold forward -- or else. I'm no paper trading expert but it seems that we have strayed from the purpose of the futures markets original intent. This has morphed into the existing default swaps (create your own list), and all of the incarnations thereof, that have plagued our financial system. Being able to take out an insurance policy on your neighbor's house and a life insurance policy on his family, without the essential "interest" in his body and assets, has created some monsters that will consume us all.
Good point, especially the insurance analogy. I sometimes wonder why traders in commodities are not limited to genuine players, but there is a lot of money to be made in churning the water. In fact, there is a lot of money to be made playing with money. I read an analysis that essentially stated in inflationary economies the best money is always to be made manipulating money as it comes into and moves around the economic system. My observations tell me that there is something to that and it seems plausible given recent history. Commodity markets should revolve around people who actually produce, distribute and consume the commodity...not the paper players who insert themselves into the system. However, I am a private property rights guy so they can set the rules on who is in the market and even the trading rules. Players beware!
You may be wrong in this case because in the end, the essential "interest" is to burn his house, kill the bastards and grab the insurance. Now that is a real destruction.