Everyone has seen them: those "inexplicable" bouts of furious selling in gold and silver, coming out of nowhere with no news or catalyst, which serve no rational price discovery purposes (because no normal seller takes out the bid stack, telegraphs a massive sell order and executes at the worst possible price) but merely are there to reprice the market higher or, as happens in 90% of the cases, lower.
In fact, look no further than what happened first thing this morning [13], when an unknown seller, smashed all stops in one big sale, and took silver to its lowest price for 2014.
[14]
There was no news, so one can't even blame a rogue algo overreacting to some headline and taking momentum ignition strategies a little far.
In short: this was a premeditated and deliberate selling of silver with one simple purpose: push and reprice silver lower.
But this is nothing new: precious metal traders, especially those who are on the other side of the table of the BIS' Mikael Charoze [15] or Benoit Gilson [16], and countless other commercial banks, are all too aware of this behavior and they take it for granted.
No, the real surprise is that suddenly none other than the CME is getting worred that manipulation this blatant is finally chasing regular retail traders away who are tired of being fleeced on a daily basis, leaving central banks and a few "fixing" banks to trade only with each other, which is not acceptable - after all it is the muppets' money that is fair game, not that of other cartel members.
According to Reuters [17], the CME, which at present has price fluctuation limits for futures contracts in some energy, agricultural commodities and financial products, but not for its precious and base metals products, is considering introducing daily limits on gold and silver futures.
"We don't have price limits in gold and silver. That's something that we are looking into," Miguel Vias, CME Group's director of metal products, said in a panel discussion at an industry event, in response to a question about how the exchange protects investors from excessive volatility.
The biggest concern for the exchange is the array of sophisticated trading programs that are capable of significantly pushing the market higher or lower, Vias said.
Oh, so it is the programs? And who programs these... programs? Could it be people? And perhaps one should look into whether actual people are ordering the programs to "significantly push the market higher or lower."
It gets better. While the clueless hacks which appear on TV speculate about plunging trading volumes, anyone with half a brain knows why most have shunned capital markets - people know the market is one rigged, manipulated casino, and never more so than now. But while until now this mostly impacted the stock and bond market, it is now moving over to gold and silver.
"Unusually big moves and the fears of price "slippage" - the difference between the price at which a market player wants to execute an order and the price at which they are able to do so - have turned some gold and silver futures investors away, he said. In the first four months of the year, COMEX gold futures volume dropped 10 percent from a year ago..."
But the best part is this:
The possible move reflects growing concern at the largest U.S. exchange of futures and options about big bouts of buying or selling that have caused huge fluctuations in prices without any apparent fundamental reason.
Funny, one could almost call huge fluctuations in price without a reason... manipulation. But better not, because what little confidence in a rigged system exists, may promptly dissolve even further.
Still, while this is merely the latest alleged case when the CME promises to clean up its act, we can be confident nothing will happen: "support for setting limits on price moves does not appear to be universal. "I think the breaks in trading are good, but I wouldn't support fixing price moves," said one U.S. trader."
Could said trader be manning the NY Fed trading desk at Liberty 33?
Ironically, there may be some hope, though not out of the CME. It appears the cannibalization in the PM manipulation industry is so bad, there may no longer be any silver "fixers" left. Also from Reuters [18], we learn that Deutsche Bank's exit from the London precious metal fixes will leave just two banks running a century-old system that sets the global silver price, likely stirring the debate about regulation of one of the most volatile commodity markets.
The bank's decision on Tuesday to resign its seat ends an unsuccessful four-month search for a buyer, as U.S. lawsuits alleging gold price-rigging by the five banks that set the benchmark turned potential suitors cold, sources said.
"You can't have a silver fixing with just two people, that's a bit of a nonsense really," a London-based precious metals trader said, adding just two participants would restrict liquidity and competition.
"It would just be two people talking to each other. I think the regulator should be stepping up a little bit here."
It should, but like the CME, it most likely won't:
Shortly before news of Deutsche's withdrawal on Tuesday, Britain's financial watchdog, the Financial Conduct Authority (FCA), said it could intervene if there were too few participants in commodity benchmarks such as gold and silver.
"If there is a risk of dislocation because people are withdrawing and we think that breaches or is a risk to our objectives, then we would set that as one of our activities but it is not entirely straightforward," head of enforcement and financial crime Tracey McDermott said on Tuesday.
And who can possibly forget the CFTC's own "quest" (or Bart "rotating door" Chilton [19]'s haircut for that matter) to root out evil silver manipulators (most of which just happen to be its superiors), which found nothing wrong.
In a five-year probe, the U.S. Commodity Futures Trading Commission investigated allegations that some of the world's biggest bullion banks including JPMorgan Chase & Co distorted silver futures prices.
After 7,000 staff hours of investigation, the U.S. commodity regulator found no evidence of wrongdoing and dropped the probe last September.
The banks faced similar accusations in a long-running class action antitrust lawsuit that was dismissed at the end of last month by a federal appeals court.
No, investors - at least those who are not close to the reserve money system - are on their own.
Whatever the outcome of the latest scrutiny, some users, including mining companies, which hedge production against the benchmark, may have little choice for now but to rely on it even with just two members.
"Whether it is good or bad or if it is down to two members, we have to use it," said Ounesh Reebye, vice president of metal sales at mining company Silver Wheaton, which is expected to produce 36 million ounces of silver this year.
Perhaps it would be best to just have one gold and silver "price fixer" left, the Federal Reserve. That way at least some integrity to an otherwise broken and manipulated market will be restored. Until then, watch as trading volumes slowly but surely trickle down to zero as everyone finally realizes what we have been saying since 2009 - in a market so manipulated, so rigged, so artificial, a far better and enjoyable option for investors around the world is just to take their money to Las Vegas.