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In The Strange Case Of Gold's Regular Morning Mugging

Tyler Durden's picture




 

Submitted by Adam Taggart of Peak Prosperity blog,

Not everyone is a morning person. And few people like Mondays.

But if you're a precious metals investor, mornings especially Mondays are brutal.

The Evidence

The precious metals are routinely sold off at or soon after the 8:20am EST morning open of the New York NYMEX exchange.

Below are the daily gold price charts (source: Kitco) for each Monday (or Tuesday, if Monday was a holiday) since early this year. The current day's gold price is noted by the bright green line. The morning takedown is highlighted by the orange oval.

Monday, January 7

Gold is taken down $10 immediately after the 8am NYMEX open

Monday, January 14

A late breaking rally begun on the London exchange is quickly contained at the NYMEX open, and then beaten down nearly $10. Notice that the previous Friday's gold price action (the bright blue line) also showed the same behavior at the same time, but with an even more severe response once the NYMEX opened.

Monday, January 21

The 8am sell-off is smaller here (only a few $), but still noticeable.

Monday, January 28

Again, a sell-off happens after the 8am open. Note again how the previous Friday's action was similar, but even more severe.

Monday, February 4

Finally, an outlier. While there was an initial dip in the first hour of the NYMEX, the price took off soon after. So let's not count this one.

Monday, February 11

An immediate $14 drop at the 8am open. The downward momentum started in London, but the vertical downdraft once the NYMEX opened is unmistakable.

Tuesday, February 19

While less sharp, the steady selling clearly begins at 8am, beating gold down $12 to the technically significant $1,600 threshold.

Volume & Timing

Running the above data by Chris, he noted two additional observations.

The first is that the price suppression is commencing increasingly in advance of the start of the NYMEX's open outcry process at 8:20am EST (i.e., how trading happens at the NYMEX). This suggests that it's being done on behalf of powerful players granted permission to circumvent the rules.

The second is that the volume levels in this pre-open trading is similar to that seen during active hours. That is very unusual in markets, and exceptionally high.

Silver

For those wondering, the daily price charts for silver indicate measurably similar action during these gold takedowns. Not in exact lockstep, but directionally similar both in degree and timing.

[Update: after initially writing this, I noticed Zero Hedge posted a related analysis today of the takedowns in silver for the month of February so far. Like gold, the selling is concentrated in the first few hours of the day on the NYMEX]

...they appear to be strangely collected in a brief four hour window at the start of the day... the black line is the average of the day's performance in February across the dates selected.

Charts: Bloomberg

The Conundrum

It's hard to swallow that these charts are evidence of a free and efficient market. Otherwise, a pattern this predictable would be quickly removed as traders and HFT algos piled in to a "sure" bet. 

Instead, this is behavior one would expect to see if powerful interests wanted to suppress the price of gold: hit the price hard and early at the start of the trading week to prevent the price from building upward momentum, as well as to make capital think twice before entering the gold market.

Who is doing this selling at the market open? Is it TBTF ("too big to fail") banks making profit on large short positions? Is it the Fed, through proxies, keeping the gold price contained so as not to signal how badly QE is devaluing the dollar? Allegations swarm across the Internet that it's one of these or both. But we don't know for certain. The exchanges don't make that information available to the public.

But while these charts above are not enough evidence to prove that the gold price is being manipulated, they sure exhibit the symptoms one would expect to see if it is.

So, the big question is: if the precious metals market is being manipulated, is it wise to be in it?

History is littered with the bodies of investors whose investment thesis was right, but whose timing was wrong. Even though precious metals investors may be correct in their fundamental rationale for buying gold, can the precious metals markets remain held in check (or driven further down) for long enough that it's not worth the risk of owning the metals at all right now?

The Decision

As I laid out in Time To Choose, investors are facing a junction where they need to make a decision. Since rising markets and fiscal policy have divorced themselves from fundamentals, the gap between "what is" and "what should be" is widening. The weighting of your capital allocation needs to be based on which side you see winning out here.

From our perspective here at Peak Prosperity, for all of the reasons explored in the Crash Course and discussed here daily, we firmly believe that fundamentals will ultimately matter most. And when they fully express themselves, there will be a tremendous re-pricing of assets largely higher for tangible assets that require energy to obtain, and markedly lower for paper claims on wealth (stocks, bonds, and their derivatives).

But as we've often said, the corrective process may very well take much longer than we ever expected to arrive. Frankly, we're amazed that the system has held together so well over the past 5 years with all of the thin-air money printing, trillion-dollar deficits, and $100 oil. If you are playing to the fundamentals, as we are, you need to be eyes-wide-open that you may be frustrated for far longer than you'd like to be.

So, if you decide to bet on the continued success of the status quo, your choices are easy: Get in the paper markets and go long. The Fed will be adding $85 billion of liquidity rocket fuel each month for the rest of the year to push the prices of your paper investments even higher.

But if you choose the fundamentals, here are a few important guidelines to keep in mind:

  • Build your core position in allocated (or better, personally held) physical bullion. It will never go to $0, you've removed or minimized counter-party risk, it can't be rehypothecated, and is often the most anonymous way to acquire PMs.
  • If you invest in "paper" gold, do it with money you can afford to lose. Risks of all sorts (price manipulation, counter-party risks, market shortages, rule changes, trackability, etc.) are all much higher. Read the prospectuses carefully, and make sure to only invest in those funds that fully back their shares with bullion (vs. futures contracts).
  • Don't use leverage. Don't let your enthusiasm make you vulnerable. Many leveraged ETFs lose money over time due to transaction costs even if the metals rise. And when the markets stay flat for prolonged times or worse, go down they can be widowmakers.

A Time to 'Hold Fast'

It's only human to have your confidence shaken when the market acts so completely differently than you think it should for so prolonged a time. Chris and I feel the same pain, both constitutionally as well as in our wallets, as much of our net worth is invested in the PMs.

But every time we go through the exercise of challenging our assumptions, we walk away feeling certain that our charted course is the correct one and that at some point, fundamentals will prevail.

As for what those fundamentals are, there's a seminal piece Chris wrote back in 2011 called The Screaming Fundamentals for Owning Gold and Silver that is even more true today. I highly recommend revisiting it.

Chris has mentioned many times that this market feels an awful lot like 2007, when asset prices powered ever higher month after month, even though the underlying data was deteriorating fast. As then, he sees a high and rising potential for a violent correction that will take the market by surprise and vaporize a lot of wealth before players are able to react.

It's times like these when you need to have the courage of your convictions and hold fast to whatever course of action you have decided upon after careful, considered analysis. During these trying periods, it's helpful to converse with a community of like-minded thinkers who can help remind you of the facts underlying your rationale which is why I recommend joining PeakProsperity.com's Gold & Silver Group if you own PMs. It's a great source of both informational and emotional support. 

Chris and I will continue to closely track the developments in the precious metals markets and report back on any material changes to our outlook as they develop. In the meantime, we'll be holding fast. We hope you'll be doing the same, too.

(click on image if in need of dramatic inspiration)

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Wed, 02/20/2013 - 21:53 | 3261899 HomeBrewPrepper
HomeBrewPrepper's picture

The opportunity I've been waiting for...lower pm prices. The rest of my silver went down with my boat in that horrific accident. Couldn't even find an anchor... Damn

Wed, 02/20/2013 - 22:02 | 3261927 SafelyGraze
Wed, 02/20/2013 - 22:03 | 3261933 SafelyGraze
Wed, 02/20/2013 - 22:11 | 3261944 Pladizow
Pladizow's picture

Once is happenstance, twice is coincidence, but three times is enemy action.” – Ian Flemming, Creator of James Bond

Wed, 02/20/2013 - 22:37 | 3262002 tickhound
tickhound's picture

But by the fourth time it has been repeated enough, becomes a lie big enough, that people come to believe it as truth... Serf Gospel.

 

Wed, 02/20/2013 - 22:44 | 3262023 BLOTTO
BLOTTO's picture

In summary, nothing has changed.

.

In fact, its worse...but not as bad as tomorrow.

 

Wed, 02/20/2013 - 22:50 | 3262032 tickhound
tickhound's picture

Exactly.  Everyday is better than the next.

Wed, 02/20/2013 - 23:11 | 3262060 nope-1004
nope-1004's picture

The last few months has been an OI battle against contract holders in the silver Comex.  Holders haven't been pitching their contracts when these slams occur, rather, they have been adding to them.  Watch over the next couple of weeks as conditions are becoming tenuous.  You saw price fall today, but looks are deceiving.  There is a major problem behind the scenes.  I wouldn't sell - period.

 

Wed, 02/20/2013 - 23:16 | 3262108 Clowns on Acid
Clowns on Acid's picture

Ummm...so what are you sayin'?

Wed, 02/20/2013 - 23:21 | 3262121 nope-1004
nope-1004's picture

Sorry, should have clarified that it is just my opinion.

Wed, 02/20/2013 - 23:46 | 3262192 Lord Of Finance
Lord Of Finance's picture

That opinion is more then valid. Goldman made the call to be a seller partly based on that. It will be a rough winters end, but gold shoots will come. 

 

   And I would like to see more selling. The gold bull is noway finished. Heck. We should all be hoping for it to drop below 1,500. Great buying opportunity and a good deal too. Hope silver falls to 26. Would be a good time to go to the junk silver depot and restack.

Thu, 02/21/2013 - 01:42 | 3262377 knukles
knukles's picture

'Bout fuckin' time somebody besides me references this shit.... been going on for years.
Early morning raids, sales in size in illiquid markets offshore...
None of which would be done by a commercial entity as they're way too sloppy...

Meant to be sloppy, seen, heard, noticed to make a big loud mean message to the rest of the world.
Not commercial dealings.

Been going on for a long time, me buckos...

Thu, 02/21/2013 - 01:54 | 3262392 TruthInSunshine
TruthInSunshine's picture

I believe that sugar is a major cause or contributing factor to even more diseases & adverse health impacts than officially acknowledged (diabetes, metabolic syndrome, insulin resistance, inflammatory conditions, c-reactive protein inducor-- even heart disease [[dietary fats, even of the saturated form, are less harmful to the heart and cardiovascular system than sugar, based on many credible studies]] and cancer), and have severely limited my own consumption of it.

I also believe people should generally have the freedom to flap their arms wildly like a bird in flight, if they're so inclined, as long as they don't hit anyone else in the face while doing so.

Thu, 02/21/2013 - 02:46 | 3262420 Dr Paul Krugman
Dr Paul Krugman's picture

Funny that anyone would think this is 'somebody' out there who wants to manipulate the system when the system is highly governed by judicial bodies such as FINRA, the SEC, and the Fed.

Maybe it isn't manipulation.  Maybe investors have had enough of holding onto an investment that doesn't pay dividends and has no growth.

Investing in gold is like putting rocks in your pants and then going for a swim.  Why would you do that?  I don't know.

In fact, it takes money out of good investments and puts them into bad investments - that can hurt finance.  Really, we may want to outlaw owning gold due to the fact that owning gold hurts the economy.

Thu, 02/21/2013 - 03:00 | 3262456 TruthInSunshine
TruthInSunshine's picture

+1 from me.

For those who don't know our Dr. PK -- think truly good, very sublime snark. It's highly refined. It's really an art form elevated.

Thu, 02/21/2013 - 03:32 | 3262477 Popo
Popo's picture

The joke is actually on the gold-manipulators.   China's buying accelerates when the price goes down.

Does anyone know how to say, "Thanks for the cheap gold, assholes?" in Mandarin?

Thu, 02/21/2013 - 05:07 | 3262515 Zwelgje
Zwelgje's picture

.

Thu, 02/21/2013 - 07:28 | 3262552 GetZeeGold
GetZeeGold's picture

 

 

 

 

While my paper dollars gently scream.

My PMs sit in my sock drawer and hardly notice.

I just consider myself fortunate that I've not had to except any IOUs.

Go hypothecate someone else's stash.

Thu, 02/21/2013 - 11:11 | 3263200 BigJim
BigJim's picture

 ...But every time we go through the exercise of challenging our assumptions, we walk away feeling certain that our charted course is the correct one and that at some point, fundamentals will prevail...

The problem is, that the fundamentals are not written in stone. You know and I know the dollar is ultimately fucked, but the 'price' of gold (like anything else) is principally determined by how much demand there is for it... and if enough people begin to think of gold as a volatile commodity, then demand for it as a safe haven or as money will drop.

When I see the shenanigans in the paper markets, I don't just see the the banksters trying to suppress price - I see them desperately doing all they can to change the perception of value in the psyches of the entire world.

If they succeed we're fucked. Let's hope they don't.

Thu, 02/21/2013 - 07:03 | 3262560 Cortez the Killer
Cortez the Killer's picture

it continues to amaze me that gold bugs dont see that the manipulator is likely china or russia (or whomever else is accumulating gold in size)

Yes, they prob have hired JPM, or GS to run short contracts into the system.

Plus the commercials are also doing the bidding of the US Govt via the exchange stabilization fund.

Ask yourselves this question; if you were a buyer in size, like russia or china wouldnt it be in your interest to keep the prices low?

Thu, 02/21/2013 - 10:22 | 3263016 GeezerGeek
GeezerGeek's picture

Perhaps the prices are driven down by Chinese cyberwarriors pretending to be working via the NYMEX. 

Thu, 02/21/2013 - 19:41 | 3265265 Lord Koos
Lord Koos's picture

It's "Xie-xie, piyan"... 

Have you ever considered that this is all part of the plan?  Making sure that Russia and China have plenty of time to increase their holdings, since both countries have a long way to go to catch up to the USA in terms of gold reserves.  Allowing the BRICs to accumulate gold for now may help to avoid war later. Just a thought.  These fuckers are greedy but they aren't stupid.

Thu, 02/21/2013 - 06:54 | 3262551 JOYFUL
JOYFUL's picture

...Investing in gold is like putting rocks in your pants and then going for a swim. Why would you do that? I don't know...

HeyDoc,

when I put goldyrocks in mis pantalones girls ask me heyBud, is that a rocket in your pocket, or just a silver lining?

To which I answer, invariably, either ore babykins...either ore...

works every time...swimmin in girlies! And the smart ones swing both ways...

bout that wad in your wallet...gettin much Doc?

http://youtu.be/D7rm9t5S4uE  (Maxwell-Ascension)

 

Thu, 02/21/2013 - 08:38 | 3262642 Roandavid
Roandavid's picture

Meet MDB's new, secret gay lover, Dr. Paul krugman.

Not that there's anything wrong with that.

Thu, 02/21/2013 - 08:49 | 3262670 jerry_theking_lawler
jerry_theking_lawler's picture

i have been following this 'OI' situation for quite a few years. i believe silver (and gold) are manipulated, however, when is it ever going to come to an END? i fear it will be quite a few more years before it becomes completely unraveled. good luck on it happening sooner though.

Wed, 02/20/2013 - 23:43 | 3262182 DoChenRollingBearing
DoChenRollingBearing's picture

@ nope

+ 1  I completely agree with "I wouldn't sell - period."

As I do not trade, this is really more theater to me, except that I do buy Au and Ag, so I have to keep an eye on the prices so I know I am not getting overcharged.

Gold is for buying and holding through time, never sell it!  GIVE it away!

Thu, 02/21/2013 - 00:08 | 3262225 DavidPierre
DavidPierre's picture

The true measure of a MAN is not how much he has...

But how much of it he gives away.

Thu, 02/21/2013 - 00:33 | 3262282 DoChenRollingBearing
DoChenRollingBearing's picture

Does giving it away to your kid count?

Thu, 02/21/2013 - 01:01 | 3262306 DavidPierre
DavidPierre's picture

"We will dance when our laws command us to dance.
We will feast when our hearts desire to feast.
Do we ask the white man, 'Do as the Indian does?'
It is a strict law that bids us dance.
It is a strict law that bids us distribute our property among our friends and neighbors.
It is a good law. Let the white man observe his law; we shall observe ours.
And now, if you come to forbid us dance, be gone.
If not, you will be welcome to us."
Chief O'wax?a?laga?lis, Kwagu'?  to anthropologist Franz Boas
Thu, 02/21/2013 - 01:33 | 3262358 CompassionateFascist
CompassionateFascist's picture

Whites are the native Americans: there was no "America" until White imperialists created it out of  a wilderness enfestered with nomadic, collectivist, asiatic savages. And Franz Boas? A Western Civ-hating, Jew-anthropologist.  

Thu, 02/21/2013 - 05:56 | 3262529 Voluntary Exchange
Voluntary Exchange's picture

Your up votes and down votes balance, a sign of a interesting post. To those who actually believe such a perspective to be the whole "truth".  

Better weapons and slave control tech doesn't change basic morality shared by just about all cultures. And better tech doesn't make a definition of "enfestered" more right compared to the truth that was murdered and buried but always seems to refuse to disappear. Here's a basic law of the universe - things eventually return to the point of origin (if not now, then "later" and with much more force). Or didn't your mama teach you - Don't steal, don't lie, don't hit? Or did papa teach that you can do these things as long as you or your friends impose a government with "laws" in your favor and use magic white (black) words like taxes, legal tender, incorporation, enforcement, justice, treaties, and war? 

Here's a little esoteric truth: when some red men said: "white man speak with fork tongue", they were sharing what they could actually see with inner vision. There was something dark "enfestered" in some "white" folks. Too bad we just about murdered their culture, maybe we could have learned a new way to "see" from them. The price paid for murder and stolen land can be quite high. 

Thu, 02/21/2013 - 06:34 | 3262542 new game
new game's picture

today is a good day to die-sitting bull

Thu, 02/21/2013 - 06:41 | 3262546 Go Tribe
Go Tribe's picture

Actually, it was Darrell on Walking Dead who said that.

Thu, 02/21/2013 - 07:33 | 3262571 Tango in the Blight
Tango in the Blight's picture

No it was Worf from Klingon.

Thu, 02/21/2013 - 12:48 | 3263532 JOYFUL
JOYFUL's picture

U got a problem with "nomads" you got a problem with whitey too...

it's what we did best, until we rode west...and ran outta plains to roam on!

Many of your so-called asiatic savages have been found to have haplogroup markers linking them to the same "Caucasians" who shared the Asiatic spaces with the Sino Tibeto-Burman and Turkic families...we were "asiatics" till we moved west, they were asiatics till they moved east...

stay focused...the sionist worm in every apple is the problem...

red/white/black/yellow/brown...we all in this mess together...the rest is just sionazi agi-prop

Thu, 02/21/2013 - 01:45 | 3262383 knukles
knukles's picture

If the kid shuts the fuck up, behaves himself and gives you some peace and quiet time, you can call it any damned thing your heart desires and nobody'll say boo!

Thu, 02/21/2013 - 01:57 | 3262397 DoChenRollingBearing
DoChenRollingBearing's picture

Well, now I know!  Ha ha!

Thu, 02/21/2013 - 02:02 | 3262400 Vooter
Vooter's picture

Does giving it away to your boat count?

Thu, 02/21/2013 - 00:35 | 3262285 jimmyjames
jimmyjames's picture

DP..very true-

Thu, 02/21/2013 - 00:49 | 3262298 tickhound
tickhound's picture

My loan officer tells me the same thing.  The IRS should put the quote on the top of every form letter.

Repeat after me, pledges... "GIVE MORE"

 

Thu, 02/21/2013 - 07:42 | 3262577 nmewn
nmewn's picture

I think Big Chief 911 meant, voluntarily gives away, not stripped from your person by whooping raiding parties of feather wearing IRS agents carrying spears or guilt tripped out of it by their statist shamans...lol.

Which remnds me, I need to renegotiate the terms of my social contract. I too would like to over spend without any consequence or responsibility.

I'm gonna call up Visa today and explain to them my wants & desires far exceed my income level ;-)

Thu, 02/21/2013 - 03:48 | 3262482 Sudden Debt
Sudden Debt's picture

YEAH! YOU'RE RIGHT!!

now, just you give me your email and I'll send you my account number on which you CAN TRANSFER AS MUCH MONEY ON IT AS YOU WANT MY BEST BUDDY FRIEND!!

Thu, 02/21/2013 - 09:49 | 3262839 dunce
dunce's picture

Could it be that some large players are trading amongst them selves to set bid asked levels and to show volume?

Thu, 02/21/2013 - 02:55 | 3262450 The Heart
The Heart's picture
"In fact, its worse...but not as bad as tomorrow."

Tomorrow is Purim...yes...lets hope things do not heat up this coming weekend on the 23-24.

Friday Ticks...and this guy is off the hook with his great reporting.

Suddenly Everyone Sells Everything For Dollars: Stocks Fall, Oil Tanks, Gold Gets Crushed, Volume Exploded. Fed Officials Divided On Future of QE. Is the Big Reset Imminent? http://investmentwatchblog.com/suddenly-everyone-sells-everything-for-dollars-stocks-fall-oil-tanks-gold-gets-crushed-volume-exploded-fed-officials-divided-on-future-of-qe-is-the-big-reset-imminent/#HPP0cMf9GRpOCrKL.99
Thu, 02/21/2013 - 09:47 | 3262833 BLOTTO
BLOTTO's picture

I was right - today is worse.

.

But not as bad as tomorrow...

Thu, 02/21/2013 - 01:24 | 3262351 A Nanny Moose
A Nanny Moose's picture

third time = bite down on something solid, to avoid suicide by tongue bite.

Wed, 02/20/2013 - 22:22 | 3261973 rotagen
rotagen's picture

The Collapse of Capitalism, a controlled demolition.

 

http://emergent-culture.com/the-world-economic-and-geo-political-game-pl...

 

 

Wed, 02/20/2013 - 22:43 | 3262019 tickhound
tickhound's picture

I'm convinced given 2 humans on the planet, no better way than to be fruitful and multiply on a more efficient scale than capitalism.

They might as well control this demolition.  The demise was inevitable.

Wed, 02/20/2013 - 23:06 | 3262076 Spastica Rex
Spastica Rex's picture

Ever read Starship Troopers? There's planets out there with riches beyond our wildest imaginations just crawling with alien bugs begging to be squashed into extraterrestrial goo.

Indians were so 19th century.

Thu, 02/21/2013 - 00:09 | 3262232 tickhound
tickhound's picture

It was a book too???  LOL!

Beyond our wildest imagination, there's a chance, OMG however slight, that...

These bugs apparently buy shit, but don't have weapons, or are just bugs, or LOL at us cuz work is for primates with no tech, or OMG within the belt of ORION was found a Bug Being Society that was pure capitalist... so much so their market agreed that...

"what earth does to itself is one thing, it is their right to decide their fate.. but Manti forbid we allow them to infringe on the sovereign rights of other planets." 

This was a human thought experiment... under the influence. 

Conquered bugs was so 20th century.

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