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Another Look at the Gold Price Drop of 6 November

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Another Look at the Gold Price Drop of 6 November

Written by Keith Weiner (CLICK FOR ORIGINAL)

 

Another Look at the Gold Price Drop of 6 November - Keith Weiner

 

The prevailing view in the gold community is that banks are speculators who bet on a falling price. To begin, they commit the casino faux-pas of betting on Do Not Pass at the craps table. When everyone wants the price to go up, the banks seem to want it to go down. Uncool.

In contrast to this view, ours is that the banks are arbitrageurs. They aren’t betting on price, they are profiting from the small spreads in between bid and ask, spot and future, future and Exchange Traded Funds.

We thought we would revisit the crash of Nov 6. Recall that our last look was at spot and futures . The quote on spot did not respond to the drop for 79 long seconds. We believe that this was a simply a delay in updating the quote, as spot quotes displayed by the data providers are indicative only. They are not tradeable.

The Bid and Ask Prices of GLD and the Dec Future

This time, let’s look at the futures market and the leading gold exchange traded fund, GLD. See chart above. 

First, notice the time period of the graph. The whole thing occurs in just under a second, at 13:30:01 London time.

Second, note that this occurred an hour before the NYSE opens, so the bid-ask spread on GLD is much wider than normal.

Third, it’s fascinating to see the immediate aftermath of the crash. There’s even a brief period when the bid in the future appears to be above the ask. We are inclined to believe that’s an artifact of the quoting process. But perhaps, in the heat of the moment, the ask price fell below the bid. Someone may have had had nine nice long milliseconds to take the bank to the cleaners.

Fourth, after that period—around the :555ms mark—we see a relatively flat bid on GLD and ask on the future. So how do we explain the slowly but steadily rising bid on the futures? Our read is that once the selling pressure is over, the market returns to normal with the tight bid-ask spread being achieved by the bid rising near to the ask. We don’t have an opinion on the unstable ask on GLD. Perhaps the market makers were moving it around guessing where things would settle. There may have been some intermittent buying too, thus the upward pressure on the ask while the bid is table flat.

One last thing to note. It does appear as if GLD sold off first. In this data series, the bid and ask prices on GLD drop 24 milliseconds before the future reacts. However, we cannot rule out that this may be an artifact of the quoting process. GLD and futures trade on different exchanges, and it’s possible that the clock on one exchange server could be 25ms ahead of the other.

 

 

 

Please email with any questions about this article or precious metals HERE

 

 

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Wed, 12/02/2015 - 17:05 | 6867510 Lazane
Lazane's picture

The banksters are driving down the paper and in the next move backing up the trucks and loading tons of their precious for the end game vaults, the jig is up, and the music is about to abruptly stop.

Wed, 12/02/2015 - 16:30 | 6867306 InnVestuhrr
InnVestuhrr's picture

Gold price will suffer apocalyptic price collapse after the deployment of the ocean-floor mining machines currently under development. These machines will just crawl along the bottom sweeping up millions of years worth of highly-concentrated gold that percolated up in super-heated water through volcanic vents and precipitated out on the bottom.

All those thousands of tons of new highly-concentrated gold are just sitting there waiting to be scooped up, refined and sold at huge profit, which will greatly increase the supply of gold and drop the price like a falling meteorite, same as fracking did to oil and gas.

Wed, 12/02/2015 - 16:18 | 6867230 DC Beastie Boy
DC Beastie Boy's picture

On another note, $13 silver today Bitchez! Stock Up

Wed, 12/02/2015 - 14:41 | 6866608 Dragon HAwk
Dragon HAwk's picture

But we can send robots to the Asteroids and mine all we want.. Engineers work for Free..   /s

Wed, 12/02/2015 - 14:37 | 6866589 Fuku Ben
Fuku Ben's picture

Thanks for the detail this helps out with some research I'm doing.

Your name is spelled wrong in the link.

Wed, 12/02/2015 - 14:23 | 6866504 SILVERGEDDON
SILVERGEDDON's picture

Paper covers rock, and wins, short term.

But, long term, paper rots, shiny rock is forever.

All you fucking grasshoppers better remember that.

Wed, 12/02/2015 - 14:53 | 6866666 Nage42
Nage42's picture

The manipulation is in the hands of the psychopaths = scissors? 

So scissors cuts paper,  butlong-term, rock smashes the skulls of the psychopaths....  Er.. I mean scissors?

 

Don't tease us with a half-assed analogy...   That'd be a half-anal...  Wait, I've gone off the rails again...

 

To the original poster.

 

The model your looking for is a rubber ball attached to a paddle by an elastic.   The latency between the spot vs. futures exchange is the length of the elastic.   You paddle around with different timings until you get positive feedback, now you have the Q of the system for oscillation.  Then using Q, you play around with how hard you can hit it without breaking the elastic, cause repeated hitting gets you noticed.   You want to hit at Q with maximum impulse "iF" and have your short/long positioning sell/buy at time Q/2 to time the low/high to maximize milage off your whack a mole.

 Q(If) = Money 

Use the mneumonic "Quiff for da money honey"

 

I've attempted to make this humorous to keep from getting angry, so do have a laugh, but it's exactly what's happening.  Among other games.

 

/Ex specialist in IT that sadly and with much regret participated in the creation of financial WMD and finally quit in disgust back in 2010.

 

Nage

 

 

Wed, 12/02/2015 - 14:03 | 6866378 KnuckleDragger-X
KnuckleDragger-X's picture

Nothing to see here, move along......

Wed, 12/02/2015 - 15:32 | 6866851 gafgroocK
gafgroocK's picture

 

 

 

And you may find yourself living in a shotgun shack 
And you may find yourself in another part of the world 
And you may find yourself behind the wheel of a large automobile 
And you may find yourself in a beautiful house, with a beautiful wife 
And you may ask yourself 
Well...How did I get here?

Same as it ever was... 
Same as it ever was... 
Same as it ever was... 
Same as it ever was... 
Same as it ever was... 
Same as it ever was... 
Same as it ever was... 
Same as it ever was... 

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