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Gold and Silver Price Conspiracies Earn Their Weight

Commodities / Gold and Silver 2010 Jun 22, 2010 - 01:50 PM GMT

By: Dr_Jeff_Lewis

Commodities

Investigations into the trading at the COMEX have yet to make headlines, but they could uncover what traders have been seeing for a very long time.  The price of gold and silver ebb and flow as part of a malicious attempt to corner the industry and create profitable opportunities for investment banks and hedge funds.


Mega Banking and Precious Metals

It has become a common battle cry among precious metal followers that large traders are manipulating the price to keep the COMEX going.  Since the COMEX allows exchange-traded fund shares and other cash equities to be used as a deliverable vehicle for gold, investors believe that the COMEX could actually offer hundred times more gold and silver than actually exists.  To keep that kind of leverage going, investment banks and the largest traders are tasked with the job of making sure that the price of gold and silver is kept at a price at which very little physical metal is actually delivered.  A gold price of $1250 means far less options will be redeemed, so the markets will continue on, able to deliver just as much gold as is requested.

See it in Action

Investors who aren't yet sold on the idea should look to see the manipulation in action.  The easiest way is to pull up a chart of either SLV or GLD (ETFs for “physical” gold and silver) and look at the week before options expiration.  In the third week of these months, most often starting one week before options expiration, the price of both physical silver and gold drop like rocks, particularly when the price is near an important (and heavily traded) futures contract price.  The trend is far more pronounced on gold, which is typically less volatile than that of silver. 

Highlighting the Trend

The manipulation attempts have worked out very well in the past year, with only a few months able to sustain enough buying volume to fight back against aggressive and often naked short selling.  Those months without a dip were often the ones in which gold performed the best, indicating that the naked short sellers can be overcome.  All in all, in eight out of the last twelve months, the naked shorting has won out, and spot prices for gold took a nosedive in the last week leading up to options expiration.

Buying on the Dips

Whether you are a believer in the conspiracy theory or just see an excellently formed trend in the metals market, you have a great chance to turn it around for a profit.  First is to center your purchases around the time when futures and options come to expire; that price is often the cheapest you'll find for that particular month. 

The trend is clear that the large price movements appear only within the week, and they are strongest when the price of gold or silver is currently sitting on, near, or slightly above, a very important options figure.  For example, $1250 or $1251 instead of $1225.  Remember, open up new positions in your favored metals only during the week up until options expiration. 

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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