How <b>Gold Price</b> Is Manipulated During The "London Fix" | Zero Hedge |
How <b>Gold Price</b> Is Manipulated During The "London Fix" | Zero Hedge Posted: 25 Nov 2013 06:42 PM PST There was a time when the merest mention of gold manipulation in "reputable" media was enough to have one branded a perpetual conspiracy theorist with a tinfoil farm out back. That was roughly coincident with a time when Libor, FX, mortgage, and bond market manipulation was also considered unthinkable, when High Frequency Traders were believed to "provide liquidity", or when the stock market was said to not be manipulated by the Fed, and when the ever-confused media, always eager to take "complicated" financial concepts at the face value set by a self-serving establishment, never dared to question anything. Luckily, all that changed in the past several years, and it has gotten to the point where even the bastions of "serious", if 3-5 years delayed, investigation are finally not only asking how is the gold market being manipulated, but are actually providing answers. Such as Bloomberg. The topic of gold market manipulation during the London AM fix is not new to Zero Hedge: in fact we have discussed both the historical basis and the raison d'etre of the London gold fix, as well as the curious arbitrage available to those who merely traded the AM-PM spread, for years. Which is why we are delighted that none other than Bloomberg has decided to break it down for everyone, as well as summarize all the ways in which just this one facet of gold trading is being manipulated.
That much is known. What is certainly known is that any process that involves five banks sitting down (until recently literally) and exchanging information using arcane methods (such as a telephone), on a set schedule that involves a private information blackout phase, even if temporary, and that does not involve instant market feedback, can and will be gamed. "Traders involved in this price-determining process have knowledge which, even for a short time, is superior to other people's knowledge," said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays. "That is the great flaw of the London gold-fixing." There are other flaws.
Yes, the broader momentum creation and ignition perspective is also known to most. At least most who never believed the boilerplate that unlike all other asset classes, gold is somehow immune from manipulation.
Ah, theoretical - smart. One mustn't ruffle feathers before, like in the case of Libor, it becomes fact that everyone was in on it.
Unless we are wrong, there was no evidence of Libor manipulative collusion before there was evidence either. And since the cabal of the London gold fix is far smaller than the member banks of Libor, it is exponentially easier to confine intent within an even smaller group of people. But all that is also known to most. As is the fact that when asked for comments, 'spokesmen for Barclays, Deutsche Bank, HSBC and Societe Generale declined to comment about the London fix or the regulatory probes, as did Chris Hamilton, a spokesman for the FCA, and Steve Adamske at the CFTC. Joe Konecny, a spokesman for Bank of Nova Scotia, wrote in an e-mail that the Toronto-based company has "a deeply rooted compliance culture and a drive to continually look toward ways to improve our existing processes and practices." Next, Bloomberg conveniently goes into the specifics of just how the gold price is manipulated first by the fixing banks, then by their "friends and neighbors" as news of the fixing process unfolds.
.. only this time the manipulation is no longer confined to a purely theoretical plane and instead empirical evidence of the fixing leak is presented based on academic research:
Oh please, 9 out of 10 times is hardly indicative of any wrongdoing. After all, JPM lost money on, well, zero trading days in all of 2013, and nobody cares. So if a coin landing heads about 200 times in a row is considered normal by regulators, then surely the CTFC will find nothing wrong with a little gold manipulation here and there. Manipulation, which it itself previously said did not exist. But everyone already knew that too. Cynicism aside, to claim that this clearly gamed process is not in fact gamed, not to say criminally manipulated (because it is never manipulation unless one is caught in the act by enforcers who are actually not in on the scheme) is the height of idiocy. Which is why we are certain that regulators will go precisely this route. That too is also largely known. Also known are the benefits for traders who abuse the London fix:
Finally what is certainly known is that the "London fixing" fix would be very simple in our day and age of ultramodern technology, and require a few minutes of actual implementation.
Which is precisely why nothing will change. Sadly, that is also widely known. So did Bloomberg put together an exhaustive article in which virtually everything was known a priori? it turns out the answer is no: we learned one thing.
You learn something new every day.
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The coordinated effort to suppress the <b>gold price</b> - Dimitri Speck Posted: 25 Nov 2013 04:16 AM PST On behalf of Matterhorn Asset Management Zurich, Lars Schall met up with Munich based quantitative market research analyst and author Dimitri Speck. Dimitri also serves as a consultant to the US-based Gold Antri-Trust Action Committee (GATA). Egon von Greyerz In Part Two (18 minutes) "THE DOUBLEFACE OF GOLD", which we publish 27 November, Dimitri Speck will explain the entire and very important post WWII role of gold and rigging of the silver market. "Part 1: The coordinated effort to suppress the gold price"Dimitri Speck is a quantitative asset manager, trading system developer and gold market analyst from Munich, Germany. He specializes in pattern recognition of charts. As part of this activity he came across an anomaly in the gold price, and he was ultimately able to demonstrate systematic interventions in the gold market since August 1993. Speck, who is a consultant to the US-based Gold Anti-Trust Action Committee, GATA, wrote the book "The Gold Cartel: Government Intervention on Gold, the Mega Bubble in Paper, and What This Means for Your Future," published in late 2013 at Macmillan – see here. "The Gold Cartel is a brisk, articulate and convincing read. Even so, it remains extremely sound. A miracle!" – Professor Heinz Christian Hafke, former German Bundesbank Director. Furthermore, Speck is the author of the German book "Geheime Goldpolitik" ("Secret Gold Policy"), which was published in 2010 at the Finanzbuch Verlag in Munich – see here. Speck is responsible for two investment funds, a stock fund and a commodity fund, both of which have considerably outperformed the market since inception. Moreover, he is the founder and editor of the website "Seasonal Charts" (http://www.seasonalcharts.com/), where accurate daily seasonal charts are illustrated. He is a well-known expert on precious metals investment analysis, and he has been interviewed for a number of investment letters and websites and has spoken at industry events on the topic. |
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