More Gold Price Manipulation?
Gold rose sharply yesterday, but the price action in gold has been more bearish than bullish since gold hit its all-time high in 2011. Many gold bugs believe that the negative action since 2011 has been the result of manipulation. They may have a point.
For some, manipulation of the price of gold smacks of pure conspiracy theorists pulling out all sorts of charts that purportedly "show" us how the price has been consistently jerked around for months, if not years. And so the idea of manipulation is summarily dismissed.
But if we use our reason and common sense, I think the argument for manipulation becomes clear whether or not you don't understand or believe in the efficacy of complicated charts, or whether or not you give credence to conspiracy theories. Reliable sources such as Art Cashin and the Jim Sinclair have pointed out that on at least five occasions over recent months very large sales of gold have occurred. Not only have such sales occurred, but they have occurred at roughly the same time of the morning, right before markets in New York open. The latest example is a sale of 2 million ounces of gold right before the big drop in price last Friday.
So ask yourself: if you were going to sell a large amount of anything in a public market, like for instance, 2 million ounces of gold, would you just dump it all on the market at once? Or would you craftily dribble your sale over some period of time that your selling would not effectively drive the price down, so that you stood to gain the most from your sale? Isn't the answer obvious?
We could add to this the fact that the sale of 2 million ounces of gold, like the previous large sales executed at precisely the same time - just before the market opening in New York - were paper sales of gold, not actual sales of real bullion. So these were effectively naked short selling - a technique typically used to drive down the price of an item. This is a technique used by traders to drive a price down so that they can sell at a higher price and buy back the shares they sold short at a lower price, thereby pocketing the difference.
I would call that manipulating the price. What else could you call it?
So you don't need to be a conspiracy theorist to understand that the price of gold - at least on these five occasions - has been manipulated.
On the other hand, you can't just whine about this. If you've lost money in gold, but believe the price will eventually head higher, then just suck it up. It may simply be that a mighty bull market, such as gold has been in since 2001, always takes a rest, usually commensurate with the rate of increase. And since gold's price went from $256 to $1911, we're talking about in increase of almost 650% - a large increase by any standards. Since it's not uncommon for an item in a major bull market to pull back as much as 50%, and the pullback from $1911 has been at most (the June lows) 37%, the recent negative action is not at all outside the bounds of that which occurs in major bull markets.
Okay, so the manipulation does get annoying. But what can you or I do about it? Not much, right? So don't let it get under your skin. Make your mind up how you feel about, better still what you think about, gold. Then base your decisions on that, rather the shenanigans of those who engage in manipulation.
For some, manipulation of the price of gold smacks of pure conspiracy theorists pulling out all sorts of charts that purportedly "show" us how the price has been consistently jerked around for months, if not years. And so the idea of manipulation is summarily dismissed.
But if we use our reason and common sense, I think the argument for manipulation becomes clear whether or not you don't understand or believe in the efficacy of complicated charts, or whether or not you give credence to conspiracy theories. Reliable sources such as Art Cashin and the Jim Sinclair have pointed out that on at least five occasions over recent months very large sales of gold have occurred. Not only have such sales occurred, but they have occurred at roughly the same time of the morning, right before markets in New York open. The latest example is a sale of 2 million ounces of gold right before the big drop in price last Friday.
So ask yourself: if you were going to sell a large amount of anything in a public market, like for instance, 2 million ounces of gold, would you just dump it all on the market at once? Or would you craftily dribble your sale over some period of time that your selling would not effectively drive the price down, so that you stood to gain the most from your sale? Isn't the answer obvious?
We could add to this the fact that the sale of 2 million ounces of gold, like the previous large sales executed at precisely the same time - just before the market opening in New York - were paper sales of gold, not actual sales of real bullion. So these were effectively naked short selling - a technique typically used to drive down the price of an item. This is a technique used by traders to drive a price down so that they can sell at a higher price and buy back the shares they sold short at a lower price, thereby pocketing the difference.
I would call that manipulating the price. What else could you call it?
So you don't need to be a conspiracy theorist to understand that the price of gold - at least on these five occasions - has been manipulated.
On the other hand, you can't just whine about this. If you've lost money in gold, but believe the price will eventually head higher, then just suck it up. It may simply be that a mighty bull market, such as gold has been in since 2001, always takes a rest, usually commensurate with the rate of increase. And since gold's price went from $256 to $1911, we're talking about in increase of almost 650% - a large increase by any standards. Since it's not uncommon for an item in a major bull market to pull back as much as 50%, and the pullback from $1911 has been at most (the June lows) 37%, the recent negative action is not at all outside the bounds of that which occurs in major bull markets.
Okay, so the manipulation does get annoying. But what can you or I do about it? Not much, right? So don't let it get under your skin. Make your mind up how you feel about, better still what you think about, gold. Then base your decisions on that, rather the shenanigans of those who engage in manipulation.
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