Gold been manipulated......

Well I wanted to bring in this point to discussion a lot earlier but preparing an article is not so easy on the topic manipulation in prices of Gold. Let us start with the some historic thoughts and facts. In early 19^th century the main gold players in London used to decided the price of the metal on daily basis in the office of Rothschild. This was notionally to find the clearing price at which all buying interest and all selling interest balanced the possibility for market manipulation and self-dealing is inherently systemic in such a cozy arrangement. This quaint anti-competitive procedure continues to this day. Many of you will not buy this but there is regular interference of the world Governments to be particular it the US government, in the gold and silver market. In other market the big guns of the world interfere so severely think when the countries dominant in the oil market decides the price of crude or  Intel, AMD and Samsung deciding on the price of the microchips to the big companies. There would be public outcry and a flurry of antitrust violation lawsuits. And this not open to public but people who knows the markets could easily figure this out. But the bitter truth is that Gold is so important to the west world that the US government Treasury , the central bank and the allied banks rig the market every day. Veteran economist and markets analyst denies the fact if asked and many simply don’t want to talk about it , there always been a  false regulation attached to these and there is no transcripts of any kind. We don’t even know that the regulation do talk about the matter or not.

The current London Gold Fix is conducted by the representatives of five bullion banks, namely HSBC, Deutsche Bank, Scotia Mocatta, Societe Generale, and Barclays. The “fix” is no longer conducted in an actual meeting but by conference call.

The main reason that one can calculate over the rigging is that the metal is the next best thing to exchange after the currency earlier there was the backing up of gold to the currency but now the currency is not backed by anything. Many other currencies of the world are backed by the US dollar but when the dollar looks in doldrums there is rigging to much more effects in gold there is a direct relationship. To be true gold is a powerful competitive currency that, if allowed to function in a free market, determines the value of other currencies and influences interest rates and the value of government bonds. So, although “conspiracy theorists” have argued for decades that the gold and silver markets have been manipulated by central governments, it is not conspiracy. It is fact.

The London Gold Pool that was instigated in the 1960’s was incontestably established with the sole purpose of suppressing the gold price. Several central banks furnished gold to sell into the market with the aim of keeping the gold price at $35/oz. This was overt market manipulation. How was this achieved? The internet site www.goldfixing.com explains here as a historical fact that “1961 - Gold Pool of US and main European central banks set up to defend $35 price, by selling at fixing to contain it”. So the London Gold Pool sold into the “fix” to suppress the price and no doubt the bullion banker making“fix”scheme.

The London Gold Pool disbanded in 1968 when it suffered massive outflows of bullion trying to frustrate free market forces that were manifesting themselves as insatiable demand for the metal.

As there is no London Gold Pool anymore does this mean that this mechanism of selling into the fix to suppress the gold price, that was pioneered by the London Gold Pool, is defunct also? Absolutely not! Analysis of the gold price data shows quite clearly that the price of gold is being heavily suppressed.
Fortunately the bullion bankers added the AM Fix in 1968. This means there are two times in the day when we know for sure that the gold price is being set in a clandestine procedure that is controlled by just five bullion banks.

Figure 1 Gold Market Timeline

We will examine the characteristics of the prices determined by the London Daily Gold Fixings to demonstrate unequivocally the gold price is suppressed. To do this let’s examine what happens in a typical twenty-four hour period as illustrated in figure 1. We have chosen to start and end the 24 hour period with the PM Fix. Three and a half hours after the PM Fix the Comex closes and gold trading is then predominantly conducted in the eastern hemisphere where the western bullion banks have much less influence and the market has a much higher proportion of physical metal trading than does London or the Comex. The period from the PM Fix to the following AM Fix is labeled “overnight” trading (indicated by the blue double-headed arrow). The period from the AM Fix to the PM Fix has been labeled “intraday” trading (indicated by the red double-headed arrow). The intraday trading includes most of the trading day on the LBMA where 90% of the world’s gold trading occurs. It would be fair to say that this is the time of the day most influenced by the western cartel of gold bullion banks. The “overnight” trading is the least influenced by the gold cartel.
The London Fix data used in the analysis presented in this article can be found at http://www.kitco.com/gold.londonfix.html

For purposes of demonstration let’s consider just a small sample of gold price Fix data as shown in Table 1. It can be seen that if a trader bought gold on the PM Fix on 7/26/2010 and sold it on the following AM Fix on 7/27/2010 he would have made $0.5/oz on the trade as shown in the “Overnight” column. If he were to repeat this trade every day then his gains and losses are listed in the column and would sum up to a cumulative total gain of $22.5/oz over the seven trades. If a trader bought on the AM Fix on 7/27/2010 and sold on the PM Fix on the same day he would have lost $16/oz as shown in the “intraday” column. If he were to repeat this trade everyday his daily gains and losses are as shown in the intraday column and by 8/4/2010 he would have cumulatively lost $6.5/oz. The cumulative gain or loss is recorded for each day in the columns labeled “Cumulative Intraday” and “Cumulative Overnight”

Table 1: Sample of Gold Fix Data

Figure 2 shows the cumulative gains/losses for “intraday” and “overnight” daily trades since the start of the current bull market in April 2001. This chart is astonishing. The cumulative price change between the AM Fix and the PM Fix in the last 9 years is negative $500/oz while from the PM Fix to the AM Fix it is positive $1,400/oz. What this means is that if a trader had each and every day purchased gold on the AM Fix and sold it the same day on the PM Fix he would have lost $500/oz. If he had instead bought gold every day on the PM Fix and sold it the following day on the AM Fix he would have made $1400/oz. (these calculations exclude fees and commissions). One could go further and say that if a trader had shorted gold on the AM Fix and covered the short on the PM Fix and then bought gold on the same PM Fix and sold it the following morning on the AM Fix and repeated this every day over the last 9 years the trader would have made $1,900/oz; a buy and hold strategy by comparison would have gained only $950/oz. ($250/oz gold price in 2001 to $1200/oz in 2010).

Figure 2: Cumulative Intraday Change & Overnight Change 2001-2010

The change in price between the AM Fix and the PM Fix are cumulatively making a trend which is increasingly losing money in a very strong bull market! Clearly the fixes are not being set to “clear the market” but are being manipulated to suppress the gold price. In figure 3 the same chart as figure 2 is shown but with the right-hand scale inverted.

Figure 3: Same Chart as Figure 2 with Right-hand Scale Inverted

What this shows is that the more gold rises over night in essentially Asian markets the more it is sold down into the PM fix. This was exactly the modus operandum of the London Gold Pool but now it is being done covertly.

Figure 4: Cross-plot of Cumulative Intraday Gold Price Change & Cumulative Overnight Gold Price Change (2001-2010)

Figure 4 is a cross-plot of the cumulative intraday gold price change against the cumulative overnight gold price change. The chart shows that the cumulative amount that gold has declined between the AM Fix and the PM Fix at any time in the last nine years displays a linear correlation with the cumulative amount that gold has risen from the PM Fix to the following AM fix for the same period. The correlation coefficient R² is 0.95 which is very close to a perfect correlation of 1.0.

This shows that someone is consistently selling down the PM Fix and the amount of the cumulative sell down is almost perfectly linearly proportional to the cumulative amount by which gold trades up overnight. That can not happen by chance.

Table 2: UP & DOWN Days for Intraday & Overnight

Table 2 shows the total number of up days and down days for both the intraday and the overnight trading from 2001 to 2010. There is a striking contrast. In fact there is almost a mirror image where the number of up days overnight is very similar to the number of down days intraday. The probability of getting this contrasting result at two different times in the same 24 hour period, in the same commodity market, and over a 9 year period is approximately one in 2.6 x 10³¹. In other words it is practically impossible for such a divergence of data to occur by chance.

This is in fact a very sophisticated market manipulation that is conducted to minimize the chances of being noticed by a casual observer. In Table 1 it can be seen that gold is not systematically sold down the day following an overnight rise. It is programmed and executed over several days which is why it is only clearly revealed by looking at the cumulative changes over time. In figure 5 it can be seen that the AM Fix data and the PM Fix data appear to almost overlay. This is because the average difference between them is managed.

Figure 5: AM & PM Fix (2001-2010)

Figure 6 shows the daily difference between the AM Fix and the PM Fix charted as a percentage change from 2001 to 2010. It shows that a staggering 88% of the data fall in the minus one percent to plus one percent range. Equally surprising 98% of the data lie in the minus 2 percent to plus two percent range. This also can not happen by accident. The gold price has increased 400% in nine years yet the percentage daily price range between the AM and PM Fixes remains locked largely in a 1% band. This is why the AM & PM fix price data appear to overlay in figure 5 because the daily variation is tightly controlled. This could only be achieved by market interference.

Figure 6: Intraday Percentage Price Change (2001-2010)

The inescapable conclusion is that some entity or entities are deliberately suppressing the gold price between the AM Fix and the PM Fix and that this suppression is calculated to proportionately counter the cumulative gains in price achieved in the Asian markets that trade at some time in the period after the prior day PM Fix until the following AM Fix. Such a consistent manipulative effort would necessarily involve entities with access to large amounts of gold; this implicates central banks as they are the only entities with large hoards of gold and furthermore they have a motive for suppressing the price of gold which is to hide their mismanagement and debasement of their national currencies. Furthermore the five bullion banks who conduct the Fix would have to be complicit because by definition they are responsible for determining the clearing price on the Fix so they must be aware of the impact on price of the selling activities of the entity or entities who are offering gold in such large quantities that it causes such price aberrations. As the central banks do not trade themselves it is more than likely that some or all of the banks involved in the Fix also act on behalf of Central Banks. What is irrefutable from this analysis is the gold market is not “fixed” it is “rigged”!

The suppression of the gold price is achieved in three main “theaters of war”:

1) The LBMA unallocated gold dealing is a fractional reserve operation with a reserve of probably less than 3%. This is largely a paper gold market that masquerades as a physical gold market. Palming off the unsuspecting investor with unallocated gold with a very low reserve ratio prevents the investor’s money from chasing real physical bullion which inherently acts as a price suppression mechanism (see my recent article Proof of Gold Price Suppression for more details).

2) For the investors who insist on having physical bullion it is important to suppress the price to dissuade them from thinking it is a good investment. As demonstrated in this article this is done by selling gold into the PM Fix to counter the rise in the price that occurs in the physical markets of Asia. This is exactly the same tactics as employed by the London Gold Pool of the 1960’s.

3) The large bullion banks, most notably JPMorgan Chase and HSBC sell short on the Comex inviting other commercials to join in the short selling binge to create frequent waterfall drops that wipe out speculators and serve as a cold shower for those who are bold enough to make leveraged bets that risegold.

Additional and complementary measures include the establishment of largely unbacked Gold Exchange Traded Funds (ETF) that serve to divert demand away from the real metal. OTC derivatives that are used to hedge the essentially naked short exposure that exists by virtue of the fractional reserve nature of the massive unallocated gold market.

The London Gold Pool failed due to insufficient gold to meet demand. In those days the paper market was not as dominant. By contrast it is through selling massive amounts of paper gold that the gold cartel has managed to keep the lid on its current price suppression scheme. But therein they have unwittingly planted the seeds of their own demise. I estimate that 45 ounces of gold have been sold in unallocated accounts for every one ounce that exists in the vaults. When just a fraction of these investors ask for their gold there will be a run on the bullion banks of epic proportions. When 45 claims go looking for one ounce of physical gold the rise in bullion prices will be breathtaking.

If you own unallocated bullion you likely only have a claim to about 2.3% of what you think you own. The window of opportunity to get your investment to be 100% bullion is closing rapidly.

This article has shown that physical gold is being dumped into the PM Fix to contain its price in a covert version of the 1960’s London Gold Pool. The result of the failure of the London Gold Pool to suppress gold was an appreciation of the gold price from $35/oz to $850/oz; a similar percentage today would carry gold to almost $30,000/oz. This is not a price forecast but an indication that when free market forces have been frustrated by market manipulation for a very long time the equilibrium price can be many multiples of the suppressed price and the rise is typically rapid when the suppression is overcome. There are many growing signs that suggest the gold manipulation scheme is coming unraveled. The onset of an epic “gold rush” is fast approaching.

The work of Bill Murphy and Chris Powell at the Gold Anti-Trust Action Committee, or GATA, has been invaluable in seeking out the truth. To obtain proof of its allegations, GATA has sued central banks and particularly the U.S. Federal Reserve, against which in 2011 it won a Freedom of Information Act lawsuit in U.S. District Court for the District of Columbia. The lawsuit produced a written admission by a member of the Federal Reserve Board of Governors, Kevin M. Warsh, that the Fed has secret gold-swap arrangements with foreign banks and that the Fed cannot ever permit these gold-swap arrangements to become public. Interestingly, last December, soon after resigning from the Fed’s Board of Governors, Warsh wrote a piece in the Wall Street Journal complaining about the new central bank policy called “financial repression.” He asserted that government policymakers now are “finding it tempting to pursue ‘financial repression’ – suppressing market prices that they don’t like.”

GATA also has proven gold-market manipulation by examining trading data, most notably in a study by its board member and market analyst Adrian Douglas showing that, as GATA says, “the gold price during trading in the London market has gone down steadily for 10 years even as the worldwide gold price has gone up steadily in that time. That is, anyone buying gold on the opening of the London market and selling it on the close every day over the last decade would have lost a huge amount of money even as the gold price rose steadily around the world.

According to GATA:

“… [R]igging the gold market is part of a general scheme by which a secretive and unelected elite in the United States controls the value of all capital, labor, goods, and services in the world – controls the value of everything.

But the mainstream financial news media in the West refuse to examine the documentation of this scheme and to put critical questions to central banks. Indeed, the first rule of financial journalism in the West is that central banks cannot and must not be questioned. This is now changing. As central banks intervene more and more to defeat markets, this rule makes most Western financial journalism simply irrelevant. But the purpose of all this market rigging is to suppress not only the prices of gold but to suppress commodity prices generally. How about crude oil or copper? It is just the latest manifestation of the everlasting war of the highest levels of the financial class against the producing class, only this time the producing class hasn’t yet figured out what’s going on. Most tragically, much of the gold-mining industry itself doesn’t understand what is being done to it – doesn’t understand that it’s not just digging metal out of the ground, but minting money and competing with all other issuers of money and that this competition is far more cutthroat

Ron Paul to the rescue

Recently, the U.S. House Committee on Government Oversight and Reform unanimously passed Rep. Ron Paul’s “Audit the Fed” bill, H.R. 459, with all the important audit provisions intact. According to Ron Paul, this victory “clears the way for a House floor vote expected sometime in late July, and with a whopping 263 co-sponsors, the chances of it passing have never looked better! This is an unprecedented opportunity for transparency into how the currency of the United States is handled, and mishandled, by the Federal Reserve. It is more important than ever that my colleagues in the House and Senate understand what this legislation does and why it is so important.”

The passage of this bill would also bring us one step closer to bringing daylight to the rigging of the financial markets – including gold. As Ron Paul said, “H.R. 459 does not limit the focus of the audit, making a full audit finally possible. An entity that controls the value and purchasing power of the dollar should not be permitted to operate in the dark without oversight by Congress and accountability to the people.”

Barclays opened Pandora’s box

Barclays, the British banking giant, agreed to pay $450 million to U.S. and U.K. regulators as part of a settlement regarding its attempts to manipulate the Libor, or “London interbank offered rate.” The world’s most important interest-rate benchmark, Libor governs approximately $10 trillion in loans – including credit card rates, adjustable rate mortgages, student loans and auto loans, plus a monumental $350 trillion in derivatives.

As part of the settlement, Barclays will admit failings. If the $350 trillion Libor market is subject to manipulation, certainly the gold and silver markets could be as well. It’s actually a shocking thing when you think about it, but I like to relate it to the gold and silver markets. These people messed around with Libor, and there’s some suggestion that the Bank of England might have thought this was a good idea when things were looking particularly dark in late 2008. The rigging may now be coming to an end because the Bank of England, to save face, is turning its back on Barclays, the company that did its bidding. Barclays published documents indicating that some executives thought they were responding to an implied directive from the Britain’s central bank.

When Barclays bank manipulated key interest rates to bolster profits during the 2008 financial crisis, senior executives said they were following a common practice that regulators implicitly approved, according to documents released by the bank and authorities. Robert Diamond, Barclays’ chief executive (like Jaime Dimon at JP Morgan Chase) has now become the target for further scrutiny and, hopefully, revelation.

The Telegraph of London reported July 7 that “Barclays stepped up its efforts to rig interest rates after its chief executive personally spoke to the deputy governor of the Bank of England. The scandal has claimed its first scalp among the senior management of Barclays, as the bank confirmed on Sunday that Marcus Agius, its chairman, was set to resign.”

Barclays, in its defense, said it not only advised the Bank of England and other British authorities about interest rate discrepancies across Wall Street, but also the Federal Reserve Bank of New York and Wall Street firms weren’t told to stop the practice, Barclays said.

The back-and-forth illustrates the tangled web of relationships on Wall Street, where authorities and bankers maintain close ties. Despite the troubling acknowledgments from the bank, regulators didn’t put an immediate halt to the practice. Some executives said they thought regulators had been encouraging the actions.

JP Morgan’s dirty tricks?

As we know, JP Morgan Chase and its CEO, Jaime Dimon, are also under scrutiny for the recent $9 billion trading loss by an institution that is not supposed to be a hedge fund. But, were they doing the government’s bidding as well? I suspect yes! Back in May 2010, the New York Post exposed JP Morgan’s manipulation of the silver market when it reported an ongoing investigation by the Commodity Futures Trading Commission and the U.S. Department of Justice into JP Morgan’s silver trading.

If that’s not enough, Reuters reported July 3 that “U.S. energy regulators have subpoenaed JPMorgan Chase & Co. to produce 25 internal emails as part of an investigation into whether the bank manipulated electricity markets in California and the Midwest.”

Either JP Morgan Chase is behaving idiotically or it is working under the cover of government protection. I favor the later scenario. Short term it may be successful, but long-term government interference in the free marketplace invariably fails and blows up.

Summary

Ron Paul’s success in the House of Representatives opening up the Fed, the disclosures at Barclays implying government involvement and the scrutiny of JP Morgan Chase both for its recent loss and previous questionable activities in the silver and electricity markets all bring in the light of day. We know vampires do not like that light. If the banks freeze these illicit activities, markets may actually be able to trade freely, allowing gold and silver to rise to their proper – and higher – levels going forward.When the dollar was under threat it was dollars artificial demand been created in the market to curb down the rising gold.
The currency has failed miserably , well again there will be scenarios which will test the currencies and gold will rise irrespective of their intervention. If left clean on demand and supply we could have seen the fall of the major currencies  permanently.