Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Turn the Tables on the Gold and Silver Market Manipulators

Commodities / Gold and Silver 2014 Sep 30, 2014 - 02:00 PM GMT

By: Money_Morning

Commodities

Peter Krauth writes: In theory, we have free markets, where manipulation is illegal and punishable.

We've found that's not often the case in the financial markets.

Unfortunately, this web of "disruptive practices" and "market rigging" is not likely to change any time soon.


Despite a government "crackdown" on illegalities that occasionally makes the headlines.

The problem may be especially manifest in the futures market.

But you don't have to be a victim...

Your Guide to the Rules Being Broken

In April, 2012, I took a close look at the issue of silver price manipulation.

Judging by the response to that article, it struck quite a nerve.

For insight I talked to Ted Butler, an expert on the silver market he's followed for 30 years.

Here's how Ted explained exactly how dominant players could be manipulating silver futures prices:

The current exact mechanism they use to suddenly rig the price lower is High Frequency Trading (HFT). This is the placing of sell orders in great quantities by computer programs that suddenly appear as legitimate orders, but are really mostly "spoofs," or orders entered and canceled immediately (in the fractions of a second). When the sell orders first appear, they spook others into selling as they give the appearance of great selling about to hit the market. Instead, it is all a bluff, intended only to scare others into selling, as the vast majority of these original sell orders are never executed, nor were they ever intended to be executed. They were designed for one purpose only - to scare others into selling.

Keep in mind this was a full year before Michael Lewis's book on high frequency trading Flash Boys.

Ted knows his stuff.

Back in 2008 the CFTC (Commodity Futures Trading Commission) opened an investigation following concerns of misconduct in the silver market. Five years later in 2013, the CFTC finally concluded that, "Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action..."

Meanwhile there's little doubt the gold price fix was rigged. After Deutsche Bank announced it was dropping out as one of the three fix participants Barclays (another one of the three), was hit with a $44 million fine for manipulating the setting of gold prices.

That came after $450 million in fines assessed to Barclays over attempted Libor rigging.

So recent news that the CME, where Comex silver futures are traded, was implementing new rules to eliminate "funny business" is extremely intriguing, to say the least.

Just last month the CME announced its new Rule 575. Effective September 15, it essentially says:

DISRUPTIVE PRACTICES - It shall be unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that -

(A) violates bids or offers; (B) demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or (C) is of the character of, or is commonly known to the trade as, "spoofing" (bidding or offering with the intent to cancel the bid or offer before execution).

Wow. In sifting through the detail of the new rules, here's what especially stood out in its explanations:

Once the smaller orders are filled, the market participant cancels the large orders that had been designed to create the false appearance of market activity. Placing a bona fide order on one side of the market while entering order(s) on the other side of the market without intention to trade those orders violates Rule 575.

And further...

A market participant places a large quantity of orders at the beginning of the pre-opening period in an effort to artificially increase or decrease the IOP with the intent to attract other market participants...

It gets more specific from there.

So there you have it. The CME itself detailing exactly the type of market manipulation that they know has gone on, and now specifically outlaw.

Which brings up three questions that should've been asked at least five years ago.

Question No. 1: Exactly why was this kind of behavior tolerated, and since when have they known of it?

Question No. 2: Given how many of these manipulative practices have been going on, what are those poor traders going to do now since that surely must have taken up most of their time?

Question No. 3: Should these new rules provide hope that we can finally get true price discovery?

Unfortunately, to this point the answers are uninspiring, to say the least...

Play the Crooks at Their Own Game, Pocket the Gains

Frankly, I'd like to remain optimistic.

Yet this is the very same CME that's being entrusted with providing the electronic auction platform to calculate the new LBMA Silver Price, since the old London Silver Fix was ended amid scrutiny by regulators.

But wait, that's not all, to use the commercial adage.

Now, the CME is competing to provide services to the new and improved London gold bid, and seems to be a frontrunner in this race. It must be that pristine reputation that sets it apart and gives it an "edge."

Should we be worried? Well, given recent shenanigans in these and other major markets, I wouldn't call it encouraging.

But consider that, even with the likely decades-long rigging (as indicated by recent studies on the gold fix), the gold price has still managed to rise from $250 to $1,900 over a span of 10 years, for a 660% gain.

Odds are manipulation will only work up to a point, with true market forces eventually overriding and overwhelming these intentional "disruptive practices."

So given the amazing returns so far, despite some artificial headwinds, precious metals are a market you'll want to stick with.

And if we can eventually approach free markets with real price discovery, that will only act to send prices higher. The much larger fundamental market forces will determine the true prices of gold, silver, and a host of other resources.

These bull markets are far from over.

Source : http://moneymorning.com/2014/09/30/turn-the-tables-on-the-market-manipulators/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in