Supply And Demand In The Gold And Silver Futures Markets

Tyler Durden's picture

Authored by Paul Craig Roberts and Dave Kranzler,

This article establishes that the price of gold and silver in the futures markets in which cash is the predominant means of settlement is inconsistent with the conditions of supply and demand in the actual physical or current market where physical bullion is bought and sold as opposed to transactions in uncovered paper claims to bullion in the futures markets. The supply of bullion in the futures markets is increased by printing uncovered contracts representing claims to gold. This artificial, indeed fraudulent, increase in the supply of paper bullion contracts drives down the price in the futures market despite high demand for bullion in the physical market and constrained supply. We will demonstrate with economic analysis and empirical evidence that the bear market in bullion is an artificial creation.

The law of supply and demand is the basis of economics. Yet the price of gold and silver in the Comex futures market, where paper contracts representing 100 troy ounces of gold or 5,000 ounces of silver are traded, is inconsistent with the actual supply and demand conditions in the physical market for bullion. For four years the price of bullion has been falling in the futures market despite rising demand for possession of the physical metal and supply constraints.

We begin with a review of basics. The vertical axis measures price. The horizontal axis measures quantity. Demand curves slope down to the right, the quantity demanded increasing as price falls. Supply curves slope upward to the right, the quantity supplied rising with price. The intersection of supply with demand determines price. (Graph 1)

Supply and Demand Graph 1

A change in quantity demanded or in the quantity supplied refers to a movement along a given curve. A change in demand or a change in supply refers to a shift in the curves. For example, an increase in demand (a shift to the right of the demand curve) causes a movement along the supply curve (an increase in the quantity supplied).

Changes in income and changes in tastes or preferences toward an item can cause the demand curve to shift. For example, if people expect that their fiat currency is going to lose value, the demand for gold and silver would increase (a shift to the right).

Changes in technology and resources can cause the supply curve to shift. New gold discoveries and improvements in gold mining technology would cause the supply curve to shift to the right. Exhaustion of existing mines would cause a reduction in supply (a shift to the left).

What can cause the price of gold to fall? Two things: The demand for gold can fall, that is, the demand curve could shift to the left, intersecting the supply curve at a lower price. The fall in demand results in a reduction in the quantity supplied. A fall in demand means that people want less gold at every price. (Graph 2)

Supply and Demand Graph 2

Alternatively, supply could increase, that is, the supply curve could shift to the right, intersecting the demand curve at a lower price. The increase in supply results in an increase in the quantity demanded. An increase in supply means that more gold is available at every price. (Graph 3)

Supply and Demand Graph 3

To summarize: a decline in the price of gold can be caused by a decline in the demand for gold or by an increase in the supply of gold.

A decline in demand or an increase in supply is not what we are observing in the gold and silver physical markets. The price of bullion in the futures market has been falling as demand for physical bullion increases and supply experiences constraints. What we are seeing in the physical market indicates a rising price. Yet in the futures market in which almost all contracts are settled in cash and not with bullion deliveries, the price is falling.

For example, on July 7, 2015, the U.S. Mint said that due to a “significant” increase in demand, it had sold out of Silver Eagles (one ounce silver coin) and was suspending sales until some time in August. The premiums on the coins (the price of the coin above the price of the silver) rose, but the spot price of silver fell 7 percent to its lowest level of the year (as of July 7).

This is the second time in 9 months that the U.S. Mint could not keep up with market demand and had to suspend sales. During the first 5 months of 2015, the U.S. Mint had to ration sales of Silver Eagles. According to Reuters, since 2013 the U.S. Mint has had to ration silver coin sales for 18 months. In 2013 the Royal Canadian Mint announced the rationing of its Silver Maple Leaf coins: “We are carefully managing supply in the face of very high demand. . . . Coming off strong sales volumes in December 2012, demand to date remains very strong for our Silver Maple Leaf and Gold Maple Leaf bullion coins.” During this entire period when mints could not keep up with demand for coins, the price of silver consistently fell on the Comex futures market. On July 24, 2015 the price of gold in the futures market fell to its lowest level in 5 years despite an increase in the demand for gold in the physical market. On that day U.S. Mint sales of Gold Eagles (one ounce gold coin) were the highest in more than two years, yet the price of gold fell in the futures market.

How can this be explained? The financial press says that the drop in precious metals prices unleashed a surge in global demand for coins. This explanation is nonsensical to an economist. Price is not a determinant of demand but of quantity demanded. A lower price does not shift the demand curve. Moreover, if demand increases, price goes up, not down.

Perhaps what the financial press means is that the lower price resulted in an increase in the quantity demanded. If so, what caused the lower price? In economic analysis, the answer would have to be an increase in supply, either new supplies from new discoveries and new mines or mining technology advances that lower the cost of producing bullion.

There are no reports of any such supply increasing developments. To the contrary, the lower prices of bullion have been causing reductions in mining output as falling prices make existing operations unprofitable.

There are abundant other signs of high demand for bullion, yet the prices continue their four-year decline on the Comex. Even as massive uncovered shorts (sales of gold contracts that are not covered by physical bullion) on the bullion futures market are driving down price, strong demand for physical bullion has been depleting the holdings of GLD, the largest exchange traded gold fund. Since February 27, 2015, the authorized bullion banks (principally JPMorganChase, HSBC, and Scotia) have removed 10 percent of GLD’s gold holdings. Similarly, strong demand in China and India has resulted in a 19% increase of purchases from the Shanghai Gold Exchange, a physical bullion market, during the first quarter of 2015. Through the week ending July 10, 2015, purchases from the Shanghai Gold Exchange alone are occurring at an annualized rate approximately equal to the annual supply of global mining output.

India’s silver imports for the first four months of 2015 are 30% higher than 2014. In the first quarter of 2015 Canadian Silver Maple Leaf sales increased 8.5% compared to sales for the same period of 2014. Sales of Gold Eagles in June, 2015, were more than triple the sales for May. During the first 10 days of July, Gold Eagles sales were 2.5 times greater than during the first 10 days of June.

Clearly the demand for physical metal is very high, and the ability to meet this demand is constrained. Yet, the prices of bullion in the futures market have consistently fallen during this entire period. The only possible explanation is manipulation.

Precious metal prices are determined in the futures market, where paper contracts representing bullion are settled in cash, not in markets where the actual metals are bought and sold. As the Comex is predominantly a cash settlement market, there is little risk in uncovered contracts (an uncovered contract is a promise to deliver gold that the seller of the contract does not possess). This means that it is easy to increase the supply of gold in the futures market where price is established simply by printing uncovered (naked) contracts. Selling naked shorts is a way to artificially increase the supply of bullion in the futures market where price is determined. The supply of paper contracts representing gold increases, but not the supply of physical bullion.

As we have documented on a number of occasions, the prices of bullion are being systematically driven down by the sudden appearance and sale during thinly traded times of day and night of uncovered future contracts representing massive amounts of bullion. In the space of a few minutes or less massive amounts of gold and silver shorts are dumped into the Comex market, dramatically increasing the supply of paper claims to bullion. If purchasers of these shorts stood for delivery, the Comex would fail. Comex bullion futures are used for speculation and by hedge funds to manage the risk/return characteristics of metrics like the Sharpe Ratio. The hedge funds are concerned with indexing the price of gold and silver and not with the rate of return performance of their bullion contracts.

A rational speculator faced with strong demand for bullion and constrained supply would not short the market. Moreover, no rational actor who wished to unwind a large gold position would dump the entirety of his position on the market all at once. What then explains the massive naked shorts that are hurled into the market during thinly traded times?

The bullion banks are the primary market-makers in bullion futures. They are also clearing members of the Comex, which gives them access to data such as the positions of the hedge funds and the prices at which stop-loss orders are triggered. They time their sales of uncovered shorts to trigger stop-loss sales and then cover their short sales by purchasing contracts at the price that they have forced down, pocketing the profits from the manipulation

The manipulation is obvious. The question is why do the authorities tolerate it?

Perhaps the answer is that a free gold market serves both to protect against the loss of a fiat currency’s purchasing power from exchange rate decline and inflation and as a warning that destabilizing systemic events are on the horizon. The current round of on-going massive short sales compressed into a few minutes during thinly traded periods began after gold hit $1,900 per ounce in response to the build-up of troubled debt and the Federal Reserve’s policy of Quantitative Easing. Washington’s power is heavily dependent on the role of the dollar as world reserve currency. The rising dollar price of gold indicated rising discomfort with the dollar. Whereas the dollar’s exchange value is carefully managed with help from the Japanese and European central banks, the supply of such help is not unlimited. If gold kept moving up, exchange rate weakness was likely to show up in the dollar, thus forcing the Fed off its policy of using QE to rescue the “banks too big to fail.”

The bullion banks’ attack on gold is being augmented with a spate of stories in the financial media denying any usefulness of gold. On July 17 the Wall Street Journal declared that honesty about gold requires recognition that gold is nothing but a pet rock. Other commentators declare gold to be in a bear market despite the strong demand for physical metal and supply constraints, and some influential party is determined that gold not be regarded as money.

Why a sudden spate of claims that gold is not money? Gold is considered a part of the United States’ official monetary reserves, which is also the case for central banks and the IMF. The IMF accepts gold as repayment for credit extended. The US Treasury’s Office of the Comptroller of the Currency classifies gold as a currency, as can be seen in the OCC’s latest quarterly report on bank derivatives activities in which the OCC places gold futures in the foreign exchange derivatives classification.

The manipulation of the gold price by injecting large quantities of freshly printed uncovered contracts into the Comex market is an empirical fact. The sudden debunking of gold in the financial press is circumstantial evidence that a full-scale attack on gold’s function as a systemic warning signal is underway.

It is unlikely that regulatory authorities are unaware of the fraudulent manipulation of bullion prices. The fact that nothing is done about it is an indication of the lawlessness that prevails in US financial markets.

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JC-BI's picture

The FED has proven itself to be quite corrupt. It'd be no surprise if Gold and Silver at some point shoot through the roof.

https://biblicisminstitute.wordpress.com/2014/08/24/the-corrupt-federal-...

wee-weed up's picture

So easy even a Fed Chairwoman can spell it...
M-A-N-I-P-U-L-A-T-I-O-N

DetectiveStern's picture

You're giving her way to much credit. You don't need to be able to spell to press CTRL+P.

Supernova Born's picture

US Fed QE hot money blew up the Chinese markets.

The Chinese are pissed and selling US Treasuries.

The Chinese know if they want a stable society they need a stable monetary base.

The obvious candidate is obvious.

OC Sure's picture

 

 

 

If one bets at the track do not all of the bets placed derive their fungibility from the horses? 

How many of those betting actually will take, or make, delivery of a horse? 

Does the limited number of horses determine how many bets are allowed to be made?

Must we limit the number of bets placed on the horses to the number of available horses?

Does the amount of bets for or against the horse have any factual relation to the performance of the horse, or is not the relationship visa versa?

Do facts about things either affirm or deny our opinions of the facts, or do our opinions about things deterimine the facts?

BurningFuld's picture

Your analogy is retarded.

OC Sure's picture

 

 

Retarded, not rebutted. 

Tinky's picture

Right, nothing says "store of value" or "good collateral" quite like "horses".

OC Sure's picture

How does the betting on the horse determine the quality of the horse?

Tinky's picture

I happen to have worked in the Thoroughbred racing industry for decades, and your analogy is more seriously tortured than those who went through Guantanamo.

Betting on horses doesn't determine their quality, but rather which is most likely to win a particular event.

OC Sure's picture

And how do "transactions in uncovered paper claims to bullion in the futures markets" determine the quality of the commodity? Or, how does it determine who will win the "race?"

SheepRevolution's picture

But there’s a reason. There’s a reason. There’s a reason for this, there’s a reason education SUCKS, and it’s the same reason it will never, ever,  EVER be fixed.

It’s never going to get any better, don’t look for it, be happy with what you’ve got.

Because the owners, the owners of this country don't want that. I'm talking about the real owners now, the BIG owners! The Wealthy… the REAL owners! The big wealthy business interests that control things and make all the important decisions.

Forget the politicians. They are irrelevant. The politicians are put there to give you the idea that you have freedom of choice. You don't. You have no choice! You have OWNERS! They OWN YOU. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought, and paid for the Senate, the Congress, the state houses, the city halls, they got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls.

They spend billions of dollars every year lobbying,  lobbying, to get what they want.  Well, we know what they want. They want more for themselves and less for everybody else, but I'll tell you what they don’t want: 

They don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. Thats against their interests.

Thats right. They don’t want people who are smart enough to sit around a kitchen table and think about how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago. They don’t want that!

You know what they want? They want obedient workers. Obedient workers, people who are just smart enough to run the machines and do the paperwork. And just dumb enough to passively accept all these increasingly shitty jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and vanishing pension that disappears the minute you go to collect it, and now they’re coming for your Social Security money. They want your retirement money. They want it back so they can give it to their criminal friends on Wall Street, and you know something? They’ll get it. They’ll get it all from you sooner or later cause they own this fucking place! It's a big club, and you ain’t in it!  You, and I, are not in the big club.

By the way, it's the same big club they use to beat you over the head with all day long when they tell you what to believe. All day long beating you over the head with their media telling you what to believe, what to think and what to buy. The table has tilted folks. The game is rigged and nobody seems to notice. Nobody seems to care! Good honest hard-working people; white collar, blue collar it doesn’t matter what color shirt you have on. Good honest hard-working people continue, these are people of modest means, continue to elect these rich cock suckers who don’t give a fuck about you….they don’t give a fuck about you… they don’t give a FUCK about you.

They don’t care about you at all… at all… AT ALL.  And nobody seems to notice. Nobody seems to care. Thats what the owners count on. The fact that Americans will probably remain willfully ignorant of the big red, white and blue dick thats being jammed up their assholes everyday, because the owners of this country know the truth.

It's called the American Dream,because you have to be asleep to believe it.

 

I miss George...

https://www.youtube.com/watch?v=i5dBZDSSky0

OC Sure's picture

Tinky, I'll give you 30 minutes for a better reply...

realmoney2015's picture

Trade in your worthless FRNs for silver today! There will be a day when dollars will not be accepted. Silver will always be money. Real, physical silver of course. Not this fake paper silver. Happy stacking!

VinceFostersGhost's picture

 

 

I'd join the cult....but giving up my gold is wacked.

 

Congrats to OC Sure for the most junks ever in a single thread.

 

Unlike MDB....he was completely serious.

TheRedScourge's picture

He may be completely serious, but that does not preclude still being a complete fool.

 

If the COMEX is a bookie, then they're not merely selling horse race bets, they're selling horse race bets which are convertible into horses. They think that they are safe since they have a stipulation that if the person converts the bet slip, they can pay in cash the value of the horse rather than the horse itself. What they don't seem to realize is that one of these days, they're going to have a different kind of horse run on their hands, whenever people start to discover that both sides of the bet are less profitable than exercizing their convertibility option.

 

The only way they get out of this in one piece is if there is a Hunt Brothers 2.0 moment, where someone goes to convert a whole bunch of options at once, and the CFTC crucifies him. If instead, it is a whole bunch of smaller actors acting together without any real coordination, they're finished.

 

 

Tinky's picture

In future, try reading the author of the post before responding ignorantly.

OC Sure's picture

 

 

Is not the essence of ignorance to accept an argument's assertions because of the argument's author and not because of the author's argument?

 

...And my advice to you, always let go of the faith and embrace the facts. Please. 

 

 

 

 

Tinky's picture

OK, I'll embrace the fact that your contributions on this thread have thus far been idiotic.

Keyser's picture

You are being far too kind, more like moronic double-talk from a troll... 

OC Sure's picture

 

 

Retarded, idiotic, moronic, double-talker, troll;

however, not rebutted. 

Pareto's picture

Totally rebutted ass clown.  you just can't fucking read.

OC Sure's picture

 

 

Retarded, idiotic, moronic, double-talker, troll, ass clown, and illiterate!

 

However, not rebutted.

 

Since no one can post a counterpoint spontaneously, why not just follow up in another article an explanation as to how the betting on the performance of the underlying source of the derived price actually determines the performance of the source itself?

 

Good Luck!

 

(and don't forget, bread and cereals are at their highest demand ever as consumers can't seem to get enough but the prices of "paper grains" are falling!  Oh my, how can this be?)

 


Bay of Pigs's picture

I've seen some real fucktards and clowns pass through this place over the last 5 years but you're right up there with the best of them!

 

Al Gophilia's picture

Yup. 13 horses and 13 jockeys, yet fourteen horses asses in this race. Man, this guy is a young fool without a clue or and old fool. There's no fool like an old fool, so what's his age?

Dog Will Hunt's picture

Sure, dipshit, I'll bite on this (and afterwards, you can bite on this).  

In the world of precious metal ETFs, too many people are holding tickets for horses that don't exist.  Never did, never will.  In the world of physical, everyone who buys and holds wins.  Everyone.    

delacroix's picture

a bet on a horse race, is not a promise to deliver a horse, or several horses, later.

Hotmustard's picture

Didn't you see those common sense safety videos as a child? When you're on fire: Stop! Drop, and Roll! 

Ancestor's picture

Pardon me good Sir,

The contention is that the paper market sets the price for the physical market - to the extent contracts are referenced to a paper market price, this is a tentatively operative relationship, until the rouse falls over.

Now, if your horses (as proxy for the performance of the underlying source) looked at their own odds, decided those odds were oracular, and all raced such that the horse with the shortest odds won, and the horse with the longest odds came last, and the field finished in accordance with this rule - then your metapor might have some comparative value.

Also note that racehorses are not perfectly fungible like an ounce of gold is - perhaps if you plan on eating them and can't notice the taste difference in the horsemeat of one animal versus another - but not in the sense their of their idiosyncracies (weight, training, temperament, etc) which have an effect on their probability of winning a race.

As for where the bets themselves derive their fungibility - one would need to consider the counterparty risk of all the bookmakers. If they all had the same likelihood of delivering on the bet, then the bets would be fungible with comparable bets (the same outlay, on the same horse, in the same race, at the same price/odds, etc.)

Indeed the weight of betting doesn't have any "factual relationship" (the word you are looking for here is 'influence') to the performance of the horse (it might on the jockey), and the reverse is true - however, in the case of precious metals markets, the weight of 'betting' (as reflected in the paper price) does affect the performance of the underlying because the paper price is the predominant reference upon which physical transactions are priced.

It is also a rather odd to ask whether the amount of betting is limited by the constrained number of horses. Sure, maybe if the bookmakers owned the horses and there was some provision that the winners could take their proceeds in horsemeat rather than cash, then there would be a limitation to the number of bets - and this is why there is a little enabling loophole called 'cash settlement'.

Hope this helps,

Ancestor :)

PavlovPup's picture

Top rebut something you must state an argument, you asked a series of asinine equine questions. What is your agrument?

 

Al Gophilia's picture

OC Sure, I'll give you a lifetime to figure out that the answer is right in front of you. 

The force is strong in this one.

 

Fukushima Fricassee's picture

It determines your fucking stupidity

epicurious's picture

Clearly you are a moron as the others have said. The betting at a track has nothing to do with the price of a horse.

hongdo's picture

Let me take a crack at it.  To use your horse analogy:
1) Betting on a horse race is establishing a derivative position on the outcome of a future condition.  It does not effect the value of the horse asset as the value is determined by the event outcome and not the bets on the outcome.  Bets are expected to be settled in cash and there is no expectation of transfer of the underlying asset.
2) A better analogy is a livestock auction which sets the value of the horse asset.  This is more similar to the commodities exchange.  An analogy to a future offering is selling a horse for future delivery with the associated risk that the horse will no longer be alive and the deal is then settled in cash per the terms of the contract.  A naked future sale would be analogous to offering a future unborn colt of a designated sire for current purchase.  The potential value of the colt determined by the probability of issue and the reputation of the sire. 
So I don't see the value of your racetrack betting analogy to a commodities market.

RockyRacoon's picture

quod erat demonstrandum

The key: "...there is no expectation of transfer of the underlying asset."

This should put the whole rancid discussion to rest.

Doña K's picture

Hi Rocky,

I have not seen lots of posts from you for a while until lately, I hope everything is okay with you.

Since you are in the business, my take on paper gold is equivalent to the six teenagers who went with their parents in a mountain resort with few things to do for youngsters. They decided to play friendly pocker game with few dollars each one had.

After an hour or two all the money had gone to two of the teenagers and the other four were busted. So then since the idea was to pass the time, the two decided to allow the others to produce chits of papers with their name and a value on it so the game can cont.

At the end of the weekend, all the cash (call it gold) was in one pocket and the rest was in several pieces of paper with names and values like Jake $5, John $10 (call them derivatives) When at home the holders of these chits tried to collect to no avail as their parents will not support the claim and the collateral was now in a possesion as per Greesham's law. Even if these chits were to be traded amongst the holders there will be no collateral available to pay. 

Paper derivatives are deadly.

However, there is a theory that these derivatives may be traded mainly by JPM and Citi by selling to eachother at a prespecified times and create sweeps up or down thus picking up the small players's stops through forced liqidation. The same can be said for FX trades

Your thoughts

 

 


Right-on Left-off's picture

... derivatives may be traded mainly by JPM and Citi by selling to each other at a pre-specified time and create sweeps up or down ..."

Undoubtedly true.  And, the event has to be set up before hand with both the seller and the buyer.  If you want to sell 1000 contracts and get them bought, all in a matter of less than a second and the existing buyers before the event only number 10 sellers with an aggregate bid for 100 contracts in total ....  Then that is all that will get filled.  Yet there always seems to be enough in volume being bid to always fill all of the asks.

Now how do you suppose that happens in the leanest trading periods of any 24 hour day?????

RockyRacoon's picture

I see no problem with your analogy.  It's just too sad that many more regular folk are being deceived and rendered destitute so that the big guys can play amongst themselves.  That makes the situation deadly -- literally.

delacroix's picture

of course they're selling and buying among themselves

Pareto's picture

+100 Fuck totally.  I'm betting on the horse to run around a track and win the fucking race.  Sure as fuck do not want to take delivery of the fucking thing.

Nostradumbass's picture

I'll bite - and perhaps regret it.

Did you comprehend this paragraph?

"Precious metal prices are determined in the futures market, where paper contracts representing bullion are settled in cash, not in markets where the actual metals are bought and sold. As the Comex is predominantly a cash settlement market, there is little risk in uncovered contracts (an uncovered contract is a promise to deliver gold that the seller of the contract does not possess). This means that it is easy to increase the supply of gold in the futures market where price is established simply by printing uncovered (naked) contracts. Selling naked shorts is a way to artificially increase the supply of bullion in the futures market where price is determined. The supply of paper contracts representing gold increases, but not the supply of physical bullion."

WTF is with your horse race example? I think all the connections between 'bets' and the underlying gold can be readily ascertained in this one paragraph - no?

Enki Anu's picture

Hey genius , maybe you work at Goldman Sacks.

Bobbyrib's picture

"How many of those betting actually will take, or make, delivery of a horse? "

The main difference being that precious metals were used as a medium of exchange long before the dollar. So people actually want to take delivery on gold and silver. The reason everyone thinks your analogy is retarded is that no one takes delivery on horses, because THAT IS NOT WHAT YOU ARE BETTING ON WHEN YOU MAKE BETS AT A RACE TRACK.

"Does the limited number of horses determine how many bets are allowed to be made?"

No, the racetrack who controls the entire system can limit how many bets are allowed to be made. Almost like a commodities exchange.

"Must we limit the number of bets placed on the horses to the number of available horses?"

No we can bet on horses not in the race. /sarcasm.

"Does the amount of bets for or against the horse have any factual relation to the performance of the horse, or is not the relationship visa versa?"

Sometimes, yes. There are people who actually follow horses and actually bet on specific horses they believe have a chance to win a particular race. Also the way the odds are determinded is by the bets being made by people. So while it does not have to have a factual relation, usually the horse with the best chance to win has the best odds to win the race.

Do facts about things either affirm or deny our opinions of the facts, or do our opinions about things deterimine the facts?

Take part one lies are misrepresented as facts all the time. There used to be scientific studies claiming smoking was good for you. It was supposed to be determinded by factual scientific studies. Our opinion about things sometime determine if we believe these so called facts, because sometimes we know the "facts" are misrepresented. Take the economic data coming out of the government for an example.

Now please shut up, fuck off, and go away.

Bytor325's picture

Emily, I have a confession to make.  I'm really a horse doctor.  But marry me and i'll never look at another horse

MortimerDuke's picture

Parimutual betting has little in common with modern commodity futures markets - with or without the assumption of manipulation in the latter.

philipat's picture

The manipulation is now so obvious and blatant that one can only conclude that "They" don't give a shit if you know (They have the Fed behind them and a captured "Regulator") and actually want it to be quite clear that PM's do NOT represent an escape route for the plebs. If so, metals could very easily decline further. Given that artificial paper Gold supply can be created ad finitum, the Cartel can do exactly what they want to the price through the Futures "Markets".

Faced with this, my strategy is to hold all my physical and play the trading game with The Cartel (Not against them) using the Commercial net short position as the guide to the wash and rinse cycles within the trading range, which is broad enough to be profitable (Because that is how the Cartel profits). I use the proceeds from trading to buy more physical. In a nutshell, don't give up but play them at their own game.

SheepRevolution's picture

Exactly. I am using DUST and NUGT in order to play their game, take profits, and then buy physical.

class of 68's picture

Philipat, 

Exactly. 

Michael Hastings comes to mind

in that all Mercedes when they hit trees have their engine leave the frame and catapult to the rear. Of course.

*phys holder 30 years 

 

philipat's picture

Yeah, I have 2 Mercs, an S and an SL and, strangely, neither of them has YET expoloded, hit trees or had the engine block fly out several hundred meters away. Strange how Hastings car could do such a thing isn't it? ;-)

I do think that this is a slightly differnt situation in this is something they WANT to be known. They are telegraphing loudly and clearly that you should NOT buy Gold because it is going to get crushed and is NOT an escape route for the plebs, who should just BTFD's and keep all their savings (Such that they might still have) either in Stawks (Shortly to be destroyed) OR in the "Security" of the Banking system (Where it can be subjected to Negative interest rates and then "Bail-Ins".

I trust them inplicitly of course/s