It's 8am, Do You Know Where Your Precious Metals Smackdown Is?

Tyler Durden's picture

Following some early strength in the Asia session, which saw Gold over $1255 (its highest in a month), the European session has seen pressure on the precious metals leak lower. That 'leak' was then helped on its way by the almost ubiquitous 8amET volume dumptaking gold and silver down markedly (though not catastrophically for now). The only other asset class showing any real action is GBPUSD (with GBP being sold aggressively) with Treasuries flat and stocks down modestly but stable for now.



and the only other asset class moving was GBPUSD...

Chart: Bloomberg


Of course, only a tin-foil-hat-wearing blogger would suggest manipulation... oh and the world's regulators as per Bloomberg:

The topic of gold market manipulation during the London AM fix is not new to Zero Hedge: in fact we have discussed both the historical basis and the raison d'etre of the London gold fix, as well as the curious arbitrage available to those who merely traded the AM-PM spread, for years. Which is why we are delighted that none other than Bloomberg has decided to break it down for everyone, as well as summarize all the ways in which just this one facet of gold trading is being manipulated.

Bloomberg begins:


Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal. The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving Barclays Plc, Deutsche Bank AG, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA.


The fix dates back to September 1919, less than a year after the end of World War I, when representatives from five dealers met at Rothschild’s office on St. Swithin’s Lane in London’s financial district. It was suspended for 15 years, starting in 1939. While Rothschild pulled out in 2004 and the discussions now take place by telephone instead of in a wood-paneled room at the bank, the process remains much the same.

That much is known. What is certainly known is that any process that involves five banks sitting down (until recently literally) and exchanging information using arcane methods (such as a telephone), on a set schedule that involves a private information blackout phase, even if temporary, and that does not involve instant market feedback, can and will be gamed. "Traders involved in this price-determining process have knowledge which, even for a short time, is superior to other people’s knowledge,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays. “That is the great flaw of the London gold-fixing."

There are other flaws.


Participants on the London call can tell whether the price of gold is rising or falling within a minute or so, based on whether there are a large number of net buyers or sellers after the first round, according to gold traders, academics and investors interviewed by Bloomberg News. It’s this feature that could allow dealers and others in receipt of the information to bet on the direction of the market with a high degree of certainty minutes before the fix is made public, they said.

Yes, the broader momentum creation and ignition perspective is also known to most. At least most who never believed the boilerplate that unlike all other asset classes, gold is somehow immune from manipulation.


“Information trickles down from the five banks, through to their clients and finally to the broader market,” Andrew Caminschi, a lecturer at the University of Western Australia in Perth and co-author of a Sept. 2 paper on trading spikes around the London gold fix published online in the Journal of Futures Markets, said by phone. “In a world where trading advantage is measured in milliseconds, that has some value.”

Ah, hypothetical - smart. One mustn't ruffle feathers before, like in the case of Libor, it becomes fact that everyone was in on it.


There’s no evidence that gold dealers sought to manipulate the London fix or worked together to rig prices, as traders did with Libor. Even so, economists and academics say the way the benchmark is set is outdated, vulnerable to abuse and lacking any direct regulatory oversight. “This is one of the most concerning fixings I have seen,” said Rosa Abrantes-Metz, a professor at New York University’s Stern School of Business whose 2008 paper, “Libor Manipulation?” helped spark a global probe. “It’s controlled by a handful of firms with a direct financial interest in where it’s set, and there is virtually no oversight -- and it’s based on information exchanged among them during undisclosed calls.”

Unless we are wrong, there was no evidence of Libor manipulative collusion before there was evidence either. And since the cabal of the London gold fix is far smaller than the member banks of Libor, it is exponentially easier to confine intent within an even smaller group of people. But all that is also known to most.

As is the fact that when asked for comments, 'spokesmen for Barclays, Deutsche Bank, HSBC and Societe Generale declined to comment about the London fix or the regulatory probes, as did Chris Hamilton, a spokesman for the FCA, and Steve Adamske at the CFTC. Joe Konecny, a spokesman for Bank of Nova Scotia, wrote in an e-mail that the Toronto-based company has “a deeply rooted compliance culture and a drive to continually look toward ways to improve our existing processes and practices."

Next, Bloomberg conveniently goes into the specifics of just how the gold price is manipulated first by the fixing banks, then by their "friends and neighbors" as news of the fixing process unfolds.

At the start of the call, the designated chairman -- the job rotates annually among the five banks -- gives a figure close to the current spot price in dollars for an ounce of gold. The firms then declare how many bars of the metal they wish to buy or sell at that price, based on orders from clients as well as their own account.


If there are more buyers than sellers, the starting price is raised and the process begins again. The talks continue until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other. The procedure is carried out twice a day, at 10:30 a.m. and 3 p.m. in London. Prices are set in dollars, pounds and euros. Similar gauges exist for silver, platinum and palladium.


The traders relay shifts in supply and demand to clients during the calls and take fresh orders to buy or sell as the price changes, according to the website of London Gold Market Fixing, which publishes the results of the fix.

.. only this time the manipulation is no longer confined to a purely theoretical plane and instead empirical evidence of the fixing leak is presented based on academic research:

Caminschi and Richard Heaney, a professor of accounting and finance at the University of Western Australia, analyzed two of the most widely traded gold derivatives: gold futures on Comex and State Street Corp.’s SPDR Gold Trust, the largest bullion-backed exchange-traded product, from 2007 through 2012.


At 3:01 p.m., after the start of the call, trading surged to 47.8 percent above the average for the 20-minute period preceding the start of the fix and remained 20 percent higher for the next six minutes, Caminschi and Heaney found. By comparison, trading was 8.7 percent higher than the average a minute after publication of the price. The results showed a similar pattern for the SPDR Gold Trust.


“Intuitively, we expect volumes to spike following the introduction of information to the market” when the final result is published, Caminschi and Heaney wrote in “Fixing a Leaky Fixing: Short-Term Market Reactions to the London P.M. Gold Price Fixing.” “What we observe in our analysis is a clustering of trades immediately following the fixing start.”


The researchers also assessed how accurate movements in gold derivatives were in predicting the final fix. Between 2:59 p.m. and 3 p.m., the direction of futures contracts matched the direction of the fix about half the time.


From 3:01 p.m., the success rate jumped to 69.9 percent, and within five minutes it had climbed to 80 percent, Caminschi and Heaney wrote. On days when the gold price per ounce moved by more than $3, gold futures successfully predicted the outcome in more than nine out of 10 occasions. “Not only are the trades quite accurate in predicting the fixing direction, the more money that is made by way of a larger price change, the more accurate the trade becomes,” Caminschi and Heaney wrote. “This is highly suggestive of information leaking from the fixing to these public markets.”

Oh please, 9 out of 10 times is hardly indicative of any wrongdoing. After all, JPM lost money on, well, zero trading days in all of 2013, and nobody cares. So if a coin landing heads about 200 times in a row is considered normal by regulators, then surely the CTFC will find nothing wrong with a little gold manipulation here and there. Manipulation, which it itself previously said did not exist. But everyone already knew that too.

Cynicism aside, to claim that this clearly gamed process is not in fact gamed, not to say criminally manipulated (because it is never manipulation unless one is caught in the act by enforcers who are actually not in on the scheme) is the height of idiocy. Which is why we are certain that regulators will go precisely this route. That too is also largely known. Also known are the benefits for traders who abuse the London fix:

For derivatives traders, the benefits are clear: A dealer who bought 500 gold futures contracts at 3 p.m. and knew the fix was going higher could make $200,000 for his firm if the price moved by $4, the average move in the sample. While the value of 500 contracts totals about $60 million, traders may buy on margin, a process that involves borrowing and requires placing less capital for the bet. On a typical day, about 4,500 futures contracts are traded between 3 p.m. and 3:15 p.m., according to Caminschi and Heaney.

Finally what is certainly known is that the "London fixing" fix would be very simple in our day and age of ultramodern technology, and require a few minutes of actual implementation.

Abrantes-Metz, who helped Iosco formulate its guidelines, said the gold fix’s shortcomings may stretch beyond giving firms and clients access to privileged information. “There is a huge incentive for these banks to try and influence where the benchmark is set depending on their trading positions, and there is almost no scrutiny,” she said.


Abrantes-Metz said the gold fix should be replaced with a benchmark calculated by taking a snapshot of trading in a market where $19.6 trillion of the precious metal circulated last year, according to CPM Group, a New York-based research company. “There’s no reason why data cannot be collected from actual prices of spot gold based on floor or electronic trading,” she said. “There’s more than enough data.”

Which is precisely why nothing will change. Sadly, that is also widely known.

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ncdirtdigger's picture

I don't buy gold often, but when I do, I BTFD. Stay thirsty my friends.

Leonardo Fibonacci2's picture

London Gold manipulation has always existed.........they are pissed that "the center of banking" was taken over from London to NY.

eclectic syncretist's picture

I will bid more mining stock at the open today, but doubt it will yet slake my thirst.

BaBaBouy's picture


By Debarati Roy Bloomberg News Friday, January 10, 2014 China may have vaulted ahead of Italy and France last year to become the third-largest holder of gold, according to a Bloomberg Industries report. Assets were probably about 2,710 metric tons, compared with the last reported holdings of 1,054 tons in April 2009, according to the report. Italy's holdings are 2,451.8 tons, and France owns 2,435.4 tons, according to the World Gold Council data. The U.S. is the biggest holder with 8,133.5 tons. China's central bank probably added 622 tons last year after reserves increased 380 tons in 2012, according to the report by Kenneth W Hoffman, senior metals and mining analyst at Bloomberg Industries.


"Based on conversations with officials in China and Mongolia, it's evident that China feels they want as much gold as much as the U.S.," Hoffman said in a telephone interview from Skillman, New Jersey. "The refiners in Switzerland have been talking about melting gold after the selloff in London and shipping it to Hong Kong and then from Hong Kong it can be traced to China."

Assets in exchange-traded funds backed by bullion fell by more than 869 tons in 2013, according to Bloomberg data, after prices fell 28 percent, the most since 1981.

"Gold has been moving from the West to the East this year," Hoffman said

The Asian nation's consumption of jewelry, bars, and coins rose 30 percent to 996.3 metric tons in the 12 months that ended Sept. 30, while usage in India, the second-biggest buyer, gained 24 percent to 977.6 tons, according to the London-based World Gold Council.

USA USA's picture

"t's evident that China feels they want as much gold as much as the U.S."


Well then, they had better Sell all that shiny stuff they have!!!

fredquimby's picture

Someone on here recommended Brigus Gold (BRD) a while back. I dumped a few quid on it and it is up 64% in a couple of months, so thanks to whoever gave that call!


oddjob's picture

Keep your Primero shares.

No Euros please we're British's picture

"they are pissed that "the center of banking" was taken over from London to NY"

We wish! London is the centre of banking, owing to the fact London allows infinite rehypothecation, NY does NOT. 

Maybe if NY had taken over, the UK might, just might, have some manufacturing instead of relying on dodgy dealings by financial services for all our GDP.

GetZeeGold's picture



Your grandkid's future tax dollars at work.


Someone posted something about this last week......but it wasn't me.

10mm's picture

Rosebud DHS insider was just off a little. it's coming.

SoilMyselfRotten's picture


My bad, i thought about buying 10 Silver Maples today and it spiked down.

The man with pointy horns's picture

Paper gold could go to zero for all I care. Besides what value is there to a paper claim in gold? Physical possession bitchez!

LawsofPhysics's picture

Only one rule applies now (in many markets, not just gold);  When fraud is the status quo, possession is the law.

DaveyJones's picture

 you said it

but it gets worse. When fraud is the law, possession by any means is the law


Fuh Querada's picture

looks like an octagenarian's dick after the viagra wore off

Greenskeeper_Carl's picture

Ops normal for a monday morning. Hopefully they can save some dry powder for another smack down in a few weeks when I get my tax return, ill have a big purchase to make, and I would appreciate the discount.

Winston Churchill's picture

Few months.In case you missed it:

Tax refunds are being delayed one month with first filing date now gone to Feb 1 from Jan 1.

Obozocare issues with forms.

LawsofPhysics's picture

The problem with all this manipulation is that eventually, all parties will demand delivery.  Keep "smacking it down" bitchez.

Can we smack it back down under $500 an ounce? 

eclectic syncretist's picture

Comex is down to 416,000 oz. registered now.  That's less than 12 tonnes, or about what china sucks up in three days. 

disabledvet's picture

somebody can. and as they do they will celebrate in ways that are not secret anymore. I am beyond worried that prices keep correcting even though mines are clearly unsustainable at these prices. if the major mines start to correct...and Governments incredibly are doing this now...then the gig is up. As India and Indonesia by restricting the outflow of "their" resources are denying massive amounts lf exhange reserves to themselves. The reasons for such insanity will become fewer...and fewer...and fewer...until you're left with the one apparently absurd but "must be true." of course markets must be allowed to "win" infinite price increases otherwise there would be no way to spend money we do not have...let alone do so with minimal to non-existent oversight. "and then suddenly you find yourself in a race you cannot win...but if you did it would be discovered that it was the race you were suppose to be winning all along."

put_peter's picture

It was my coffee mug to the keyboard... sorry folks.

John___Connor's picture

A spike up is healthy buying but a spike down is manipulation? Bias much Tylers?

El Hosel's picture

Get your fix at Silver 19.66,  while you can, Bitchez.

Race Car Driver's picture

When was the last time you saw a spike up that wasn't smacked back down again in a day or so? C'mon, be honest.

IdeasRbulletproof's picture

If the price mechanism is doing what it's obviously supposed to do, what would there be to complain about? Personally, right now I believe we should be well over $2000. So even a $50 jump wouldn't mean much to me at this point...

DaveyJones's picture

it's called "economic history"

are you suggesting TBTB have an interest in that other direction

q99x2's picture

Move on them with tanks and heavy artilary..

buzzsaw99's picture

All I hear from you, you spineless cowards, is how poor you are; how you can't afford my taxes. Yet somehow, you managed to find the money to hire a gunfighter to kill me. If ya got so much money, I'm just gonna have to take some more. Because clearly some of you haven't got the message! This is my town! I run everything! If you live to see the dawn, it's because I allow it! I decide who lives and who dies! [/John Herod]

Debugas's picture

OMG $5-$10 move in gold is reported as smack-down

the gold is exactly where it was a month ago in the range between $1200 and $1250

GetZeeGold's picture



How much has the deficit gone up in that time?


Would you say it was a plethora Pepe? It's funny how gold tracked the debt over a decades time.....then all of a didn't. I gotta wonder how much that is costing us.

Bobbyrib's picture

Now that they have the 10 year under control it is back to business as usual. If the ten year starts rising, gold must be able to rise as well, so that the manipulators make sure the 10 year is below 3%.

Dr. Engali's picture

None of this means anything unless you are buying gold for an investment, godd luck with that if you are, instead of what it should be which is insurance against currency devaluation. TPTB have a clear control on pricing right now and they can manipulate it in the short term, but eventually real pricing will over catch up with them. Until then don't get discouraged and take advantadge of the smackdowns.


By the way Yahoo is busy beating up gold with Bob Doll.

Here's why gold's drop isn't done yet


I haven't known him to be right on much, probably why he works for Nuveen now.

LawsofPhysics's picture

Please, TPTB can afford to load up on physical at these prices.  One reason the price in fiat has been range-bound for some time now.

But yes, just say "thank you" with every "smack down".

Temporalist's picture

2 gold bashing stories lead on Yahoo's finance homepage today, back to back mondays with gold bashing lead stories, to start 2014.

What a meaningless worthless metal gold must be to have so much attention for no good reason.

...out of space's picture

1 month gofo is negative 

Quinvarius's picture

Gold is global power.  Fiat is local control.  They will realign their priorities when they realize they are not running the world anymore.

LawsofPhysics's picture

And once the locals are using PM's and barter?  What then?  Laws that cannot be enforced, are not really laws at all.

Balvan's picture

People dumping barbarous relic, that's all. No need for conspiracy theories

Quinvarius's picture

Morality and ethics are also barbaric relics.  So is the law.  These things interfere with the government's ability to do what ever the Hell it wants.  There is no need for such underpinnings of a stable society in today's modern world. 

GetZeeGold's picture



People dumping barbarous relic 


Dumping it for what again?

LawsofPhysics's picture

Oil?  Arable land?  That's all I could think of maybe...

disabledvet's picture

supplies are coming on line. period. QE is winding down...the Banks that "played ball" by simply loaning the the money from the Government right back to the Government have completely lost the game. Prices now will fall, spreads will flatten...perhaps dramatically so...and a world unburdened by the need for all this "massivism" will be born. will be all the "little country's fault" (Greece, Ireland, Portugal...then Spain, then Italy...then France itself.) But as it becomes clear that a more sustainable future really has been realized no one will miss the old order as it is simply swept away.

vincent's picture

------->Dow 20,000 in 2014 and metals go nowhere.

------->Dow corrects significantly in 2014 and metals get crushed.

blindman's picture

Charlie Poole & The North Carolina Ramblers-White House Blues (September
20, 1926)
"White House Blues"
McKinley hollered, McKinley squalled
Doc said to McKinley, "I can't find that ball",
From Buffalo to Washington
Roosevelt in the White House, he's doing his best
McKinley in the graveyard, he's taking his rest
He's gone a long, long time
Hush up, little children, now don't you fret
You'll draw a pension at your papa's death
From Buffalo to Washington
Roosevelt in the White House drinking out of a silver cup
McKinley in the graveyard, he'll never wake up
He's gone a long, long time
Ain't but one thing that grieves my mind
That is to die and leave my poor wife behind
I'm gone a long, long time
Look here, little children, (don't) waste your breath
You'll draw a pension at your papa's death
From Buffalo to Washington
Standing at the station just looking at the time
See if I could run it by half past nine
From Buffalo to Washington
Came the train, she's just on time
She run a thousand miles from eight o'clock 'till nine,
From Buffalo to Washington
Yonder comes the train, she's coming down the line
Blowing in every station Mr. McKinley's a-dying
It's hard times, hard times
Look-it here you rascal, you see what you've done
You've shot my husband with that Iver-Johnson gun
Carry me back to Washington
Doc's on the horse, he tore down his rein
Said to that horse, "You've got to outrun this train"
From Buffalo to Washington
Doc come a-running, takes off his specs
Said "Mr McKinley, better pass in your checks
You're bound to die, bound to die"

Sufiy's picture

Glenn Beck: Where Is German Gold?

  Glenn Beck is digging up the mystery of German Gold repatriation. With the reports that even small amount of the delivered Gold so far was melted beforehand we can be sure that there is no more original German Gold left. As we have discussed before, theGold smashing down has started with Venezuela's request for Gold to be returned back and last year Gold's bloodbath was assured with Germany seeking for its Gold to be returned as well.

maneco's picture

Whenever the British pound gets hammered the PTBs (BIS) hit gold in order to stabilize the British pound. The Pilgrims (NY and London banker secret society) are in charge of and manipulate the precious metals in order to maintain the illusion that their paper currencies are actually hard currencies.

More about the Pilgrims:

GaryBusey_thesilverstacker's picture