Friday, March 2, 2012

Wednesday's Intervention - Too Big To Spoil?

 This is what a 6.5% fall in silver looks like..




On Wednesday 29th February, in the space of minutes, gold fell by 5% and silver by 6.4% on the COMEX. A growing chorus of managers and market analysts are suggesting the market pummelling was more than just volatility at work: 
  1. Spokesman for CIBC World Markets: http://www.goldalert.com/2012/02/large-seller-in-the-market-as-comex-gold-hits-1708/
  2. Caesar Bryan, 25 year veteran Gabelli Gold Fund manager: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/1_Caesar_Bryan__Yesterdays_Gold_Selling_Raises_Serious_Red_Flags.html
  3. Hugo Salinas Price, president of the Mexican Civic Association for Silver: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/1_Billionaire_Hugo_Salinas_Price_-_Central_Banks_Smashed_Gold.html
  4. Ross Norman, Sharps Pixley, London: http://www.sharpspixley.com/comment/gold-fall-creates-a-fantastic-window-of-opportunity-for-potential-buyers/108251
  5. William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey on Bloomberg: http://www.bloomberg.com/news/2012-02-29/gold-falls-most-this-year-as-bernanke-gives-no-signal-of-any-new-stimulus.html  "and it almost seemed as if Bernanke was trying to take the steam out of the commodity market.”
  6. JS Kim, http://www.theundergroundinvestor.com/2012/03/smartknowledgeu-discusses-gold-silver-manipulation-on-the-keiser-report/
  7. Single 31 tonne sale on the CME: http://www.zerohedge.com/news/asia-buys-gold-after-massive-single-trade-sell-during-bernanke’s-testimony
  8. Sprott Asset Management's John Embry: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/29_Embry_-_Gold_%26_Silver_Smash_Temporary%2C_Oil_to_Super-Spike.html
  9. Jim Sinclair described it as an Intervention: http://www.jsmineset.com/2012/02/29/todays-window-dressing-fall-in-gold/
  10. What reason to liquidate a big position?: http://jessescrossroadscafe.blogspot.com.au/2012/03/single-large-seller-smashed-gold-market.html
  11. Resource Investor: "no reason to justify massive selloff": http://www.blogger.com/goog_154617741resourceinvestor.com/2012/03/01/plunge-called-temporary-smash-paper-fiasco?ref=hp
  12. 225,000,000oz dumped in minutes?: http://jessescrossroadscafe.blogspot.com.au/2012/02/today-is-first-notice-day-for-silver.html
  13. Fascinating charts of the event: http://www.321gold.com/editorials/nichols/nichols030212.html
  14. Gold fell more than $60 in minutes and can be manipulated on COMEX by big forward paper sales: http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=146665&sn=Detail&pid=110649
  15. Plunge in gold was entirely a manipulation of the paper futures: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/3/3_Egon_von_Greyerz.html
  16. Manipulation plain and simple: http://www.kitco.com/ind/Bevan/20120305.html
  17. Thirty-one tonne sell order: http://www.moneyweb.co.za/mw/view/mw/en/page292523?oid=563406&sn=2009+Detail
  18. Who sold millions of ounces of silver?: http://www.youtube.com/watch?v=YU_a5VHU3Lc&feature=player_embedded
  19. James Turk - Intervention out of desperation: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/5_Turk_-_Central_Banks_Intervened_in_Gold_Out_of_Desperation.html
  20. Andrew McGuire, silver whistleblower - massive paper contracts hitting the market on no real news: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/3/2_Andrew_Maguire.html
  21. Dan Norcinini - Orchestrated hit to prop up bond market: http://traderdannorcini.blogspot.com.au/2012/03/bonds-and-other-assorted-topics.html
A common theme among all the reports above is that a single seller dumped massive quantities of futures into the market without regard to obtaining the best possible price. Fortunately whether the selling was a deliberate attempt to influence the market or not, we needn't fear. The Dodd-Frank legislation enacted last year is designed to enable regulators to prosecute reckless behaviour regardless of intent.  One would therefore expect the controversial legislation to trigger sufficient grounds to investigate Wednesday's chaos. Of course any CFTC comments regarding their intentions would be most welcomed by the public.

As to the possible identity of the alleged seller, the Bank of International Settlements is so far the one of the select few entities to lay claim to being the mastermind behind precious metals market manipulation: http://comexwehaveaproblem.blogspot.com.au/2012/02/bis-advertises-gold-market-intervention.html. However to corroborate such claims and give a clue as to how such gold and silver operations may be affected, the Bank of Japan was reported by the Wall St Journal on Feb 7th to have revealed it has engaged commercial entities to assist with secret currency interventions. It does not require a large leap of the imagination therefore to wonder if central bankers may have found the occasion of Wednesday's appearance before the House Committee and Speech by their most prominent member, a tempting occasion to intervene in the gold and silver markets via the commercial banks.

Now my hypothetical question to the regulators is this: If the CFTC investigated such an occasion as Wednesday's gold and silver smash as they should, and found a commercial entity 'intervening' recklessly in the gold and/or silver market at the behest of a central bank, would that entity share the same immunity from prosecution as its central bank sponsor and if so, what oversight measures may there be to ensure the bank involved was not tempted to trade its own account for illegitimate profit as it carried out its sanctioned government business?

7 comments:

  1. One wonders as this practice becomes more revealed to the public - and accepted as "routine"
    and "common central bank behavior" - how people like Bernanke or La Garde will justify its fundamental dishonesty to their respective constituencies...

    BGD
    Idaho

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  2. Why does it not happen that China, Russia, India, Saudi Arabia, South America, etc, not step in and buy at these unusally low prices?

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    1. I suspect they think it has further to fall.

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    2. Charlie. What was sold was paper gold. If a large physical buyer came into the market it would explode the price. CBs don't buy in the open market at least not openly or in size. They get their gold from the other CB sales, IMF sales and their own production. Otherwise purchases are done very surreptitiously and only when real physical is offered for sale and so they don't bid up the price overtly.
      Large private buyers are also constrained by political pressure. There is a reason Buffet openly knocks gold it pleases those he depends on for favors. No wealthy person wants to be on the wrong side of TPTB.

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    3. The reason why these markets are still in a bull market phase is for that very reason: there ARE serious buyers of the physical metal at each volatile setback, and less metal to go around following each time it happens.

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  3. Make that “almost none”, as Hugo Salinas Price and Eric Sprott, at least by my modest standards, would be classified as wealthy, And they’re very outspoken on this issue.
    Of course billions are pilfered by the bullion banks weekly, i.e. JPM GS or HSBC et al, at every twist and turn of the market.
    JPM saw fit to brag how they had a “perfect quarter” announcing a 100 million plus profit for every single day for the last quarter on their trading desk. Of course this is only possible in a completely rigged and manipulated market, controlled by the very same players that do the front running for the Fed and other CBs. All under the watchful eyes of the regulators e.g. CFTC and SEC, who make sure these larcenists are protected from criminal prosecution for their nefarious crimes on the grandest of scales.
    Yes it is official now, all law and order has been disbanded in the great US of Abhorrence, well that is at least if the crimes committed are of a magnitude incomprehensible for the average Joe Sixpack, and perpetrated by the ‘in crowd’, e.g. Corzine, Diamon, Blankfein, Bernanke, Paulson, Geithner, Obama etc, etc, etc.
    But if you’re trying to compete in the so called ‘free market’ building Guitars, produce Organic Food, or mint gold coins you’re harassed and prosecuted to the infinite degree will all the forces disposable to the clobber machine of TPTB.

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  4. Ha Ha Ha Ha CFTC has one "investigation" of Silver manipulation ongoing for FOUR YEARS.....when Madoff does it, it is called fraud, when JP Morgan does it, it is called "the free enterprise system".

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