Wednesday, March 31, 2010

MANIPULATION? LET'S HOPE SO

We’ve been having quite the discussion about manipulation on the blog lately. For what it’s worth everyone can believe what they want to believe. What I do know is that no amount of manipulation can stop a secular trend. I think Greenspan and Bernanke have proven that fact explicitly. Between the two of them they have printed literally trillions and trillions of dollars in a vain attempt to halt the bear market. It hasn’t worked and it’s not going to work. All its done is make our problems much worse than they had to be. Ultimately the secular bear market will not end until stocks become cheap. The longer we fight that process the worse it’s going to be in the end.

But back to the manipulation theme. Just as an example back in the spring of last year the Fed openly stated their intent to artificially hold interest rates down. They were determined to print as much money as needed to support the bond market and consequently drive rates down (interest rates move inversely to bond price). Let me show you what they accomplished.


What they accomplished was to put in a final top in the almost 30 year bull market in bonds.

Let me show you another one. In Sept of 08 the SEC in its infinite wisdom decided to ban short selling in financial stocks. The end result? Financials dropped much farther than they would have naturally.


Folks let me tell you right here and now whenever you see or hear about the government managing any financial asset run, don’t walk, to take the opposite side of that trade.
 
Now the big stink is that gold is being manipulated. For our sake I hope so. It will mean that gold will go up much much further than it would all on its own.
 
If one is interested in the topic they kind find innumerable articles, interviews, papers and speculation purported to “prove” the fact at the GATA website. A website basically dedicated to exposing said manipulation. I guess it’s no surprise they have a mountain of “evidence”.
 
But let me just throw out one warning. This is one of the oldest tricks in the book. As long as one can lay the blame for any mistakes on some mysterious manipulators they never have to take responsibility for any bad calls. Hey it’s not our fault gold didn’t go to $1300 like we said the government is suppressing gold.

Fact is any manipulation to depress price below the natural level of the market will only increase demand. Let's face it no one controls demand. Any attempt to force price lower than where it should fall normally will just bring in more demand from China, India, Europe, investors, etc.

If the governement is actually trying to control the price of gold it just means gold will go much higher than it would normally . We can only hope there is manipulation going on as it probably means gold will go to $10,000 instead of $5000.

21 comments:

  1. Toby,

    It's not that you aren't getting any comments about your "Manipulation, Fact or Fantasy" theory, it's that you aren't listening.

    I read your article on Kitco along with All the other articles that have been explaining, more eloquently than I can, why there is a belief the gold market is manipulated. The interesting thing about your article isn't the inquisitive nature of your hypothesis it's the fact that it is rhetorical. You clearly don't want to spend the time researching the truth but instead create these fancy little graphs that you split up over a few year increments to try and justify your point, which is pointless. Step away from the trees and you might notice the forest. For example: your first set of graphs show the USD Index at 81 in the beginning of 2005 and the gold price at $420. Your last set of graphs show the USD Index at 81 again in Mar 2010, yet the gold price is $1,100.

    I'm not suggesting that in itself proves the gold price is being manipulated, but it clearly doesn't show the correlation you're trying to state between a falling dollar and rising gold price.

    Whatever the truth is your hypothesis needs a little more work to, well...pan out.

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  2. Believe me I've watched all the videos and read all the articles for 7 years now. It's nothing that doesn't surface during any bull market although I will say it does appear to be more rabid in the gold market.

    I have no idea why gold bugs are so emotional about gold ...but they are.

    But like I said lets hope there is manipulation going on it only means the price of gold will go all that much higher.

    Just a case in point and one that I see bandied about quite often. Apparently the level of short selling in gold greatly exceeds the supply of gold. The conspiracy is that that is depressing price.

    Quite the contrary if there are parties with huge outsized short positions that's just fuel for the fire when the secualr trend resumes. All those shorts will have to cover sending gold rocketing higher.

    I actually take the reasonable gains we've seen in gold as proof there is no manipulation. If there was gold would have gone through the roof by now as price ran over the manipulators.

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  3. Yes, and Toby, I couldn't stop laughing when I heard about the "assassination attempt". These guys are such drama queens.

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  4. I suppose that by 'manipulation' most people don't mean that the Fed or CTFC can do whatever they please with the equity or gold market but that they can nevertheless affect in a substantial way their natural course at least over the mid-term.
    And there is ample evidence that they have done that regardless if want to see it or not.
    Certainly the cyclical bull we're in is not the 'statistical' rebound one should expect in this secular bear market.
    There are concrete political, economic and sociological benefits accrued from a rising stock market and in the rising 'socialist'/ 'corporate-fascist' political environment it has become more a government propaganda tool than a powerhouse of a true capitalist economy.
    As far as the gold market is concerned the richest people own the most gold. They have every interest in seeing its price rise in the long term. However, venues like COMEX where the ignorant / naive small investors / speculators can buy the right to own some gold are controlled by a few banks with huge short positions and serve more as fleecing grounds than as market mechanisms for true price discovery.

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  5. I'll say it again. No one can control demand. Any attempt to depress price will just increase demand from China, India, Europe, etc. That in turn will drive price higher.

    It really isn't possible to manipulate a secular trend for anything other than the very short term.

    We can only hope the governement is trying to depress the price of gold. It just means it will go much higher than it normally would.

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  6. Personally, I think this whole argument is something of a red herring.

    I don't see how it helps us to make money from the markets, and to some extent, all markets are manipulated by the big players.

    This is the arena we have to trade in. Wishing it was different or arguing about who controls it is a waste of energy. We can't change the playing conditions, so lets accept it for what it is and get back to discussing how to make money from it.

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  7. Yes it is sensless to worry about something that we have no control over and something that if it is happening would only act to raise prices much higher than they would normally go to.

    Why anyone would complain about the governement doing something that's virtually guarantted to send gold to the moon is beyond me.

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  8. I am somewhat reminded of the old saw that in the short term the market is a voting machine, but in the long term it is a weighing machine....
    yes, certain powers are stuffing the ballot box; but in the long term the true weight of gold will be revealed.

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  9. Toby,

    I've been waiting for this market correction you have been predicting. I'd like to get into some mining stocks.

    The market has just kept on moving along. Is there a chance that it may be some time before they get some sense and pull back a few percent?

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  10. Very often these momentum moves end with a big whoosh down. Personally I think it's just way too late to initiate long positions at this point. Even if gold and miners have bottomed they will still follow the stock market down if it gets whacked so there is no need to chase them right now.

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  11. How do you ever make any money when you are out of the market most of the time? The Dow is up 300 points since the first week of March, at $5 a point you have lost $1500 sitting on cash.

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  12. Who said I was out since the first of March? I said we started seeing distribution since the first of March. I suggested going to cash when sentiment reached extreme levels. That was about two weeks ago. The market has basically gone nowhere since then.

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  13. The stuff yu wrote " 'There is no manipulation in gold futures market'" and published in " http://www.commodityonline.com/news/There-is-no-manipulation-in-gold-futures-market-27096-3-1.html" is being laughed from people in U.K, EU. and Asia...not U.S coz...since yu are American.....my friends asked me ...wut's going on in America....they don't read or wut....please....do more research before you type...or ....go around the world and show your paper in person instead ....dunno why...take it out before your reputation being bloodly damanged.

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  14. Geez you people are just ignorant as to how bull markets work.

    I'll say it again. All markets are manipulated to some extent. That certainly includes the gold and silver markets. But the fact remains that any manipulation will only serve to hasten what would already happen anyway.

    I do realize this is like trying to convince someone that global warming is a scam. When people make up their mind that something is so, no amount of "truth" will disuade them.

    I've had discussions with with irrate "environmentalists" who were just indignant that I would even think to question global warming. Despite the fact that nothing is happening today that hasn't happened umpteen times in the past. Despite the fact that the world has actually been getting cooler since the turn of the millinium.

    Facts don't matter. When someone has made up their mind then it's so.

    The fact is in a true bull market (which gold is) any manipulation that distorts price will only hasten what would already occur naturally.

    100 to 1 naked short selling? Great! As soon as they have to cover that position price will soar higher. Fed selling contracts short for gold they don't have? Even better, when that gold gets called price will go through the roof.

    This is just basic supply and demand people. Anything that artififcially depresses price will increase demand. If price gets depressed far enough you end up with shortages.

    Case in point during the crash we saw margin selling force the price of gold far below were it should have been under normal conditions. What was the result? All physical gold was taken off the market. The end result was that price rebounded violently and gold was the first asset to not only recover all of it's losses but to actually trade at new all time highs. It did that expressly because price was forced too low.

    Any manipulation to knock price below where it would trade naturally will just cause more demand. If manipulation is strong enough you end up with shortages. Then price soars.

    You say that price would be higher without manipulation but that's a ridiculous statement. How on earth can anyone know where price is "supposed" to be. The market "knows" where price is supposed to be and will take it there. Any attempt to force price below it's natural level will only result in price rising faster and further than it would naturally.

    It's like holding a beach ball underwater. The further down you push it the more violently it rushes to the surface when you let go.

    Gold has consistenly followed the ABCD wave pattern through out this bull market. So no amount of manipulation has been effective in changing that.

    Every C-wave has resulted in a parabolic move higher, several have resulted in massive parabolic moves. So no amount of manipulation has halted that process.

    And let's face it just like every asset gold must obey the laws of regression to the mean. There is only so far something can stretch before it snaps back.

    Gold only corrects when the dollar rallies. Now if gold were to drop when the dollar was falling I might buy the whole successful manipulation idea but that never happens does it?

    Since that never happens, then if you think gold is being manipulated you also have to believe the currecny markets are being manipulated. Please don't tell me you think the largest markets on the planet are being manipulated with the goal of taking down the price of gold.

    Folks if there is manipulation going on then it is directly responsible for those huge C-wave advances. So you should thank the government or Fed or JPM or whoever you believe is behind this for making you a ton of money.

    All that being said I realize that I will never convince anyone no matter how much I try. The conspiracy believers need to believe. Just like the global warming crowd needs to believe despite all the facts to the contrary.

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  15. So go ahead and rail against whoever you think is screwing you. Personally if they are real I want to thank them for making me alot of money over the years.

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  16. you don't own gold bullions....then...how could you understand the beauty of gold??? get some kg or ton gold bullions before put down any thought upon gold market....it's all about self-respect. ask your president and see if he owns gold, as your central banks and see if they own gold, ask illuminatis and see if they own gold...but you....the one who really own gold..never publish any disinfo.....do you own gold bullions??? how many kg. bars then??? it doesn't make any sense when read things from goldscents...says somebody...not me....above there...not my thoughts....but the replies from people I showed the article you worte.

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  17. LOL I've owned lots of gold and silver. I don't right now because the mining stocks are underpriced compared to gold and the percentage gains will be much larger.

    Please just take a class in basic economics 101 and you will understand why gold can not be manipulated and if it is then it is only causing the price to go up much much faster than it would naturally.

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  18. Toby you have the patience of Job in dealing with these conspiracy people. Thanks very much for your explanations on how market pricing works.

    P.S. I can't resist sticking in my own two cents: I think you will get your "whoosh" down in 2 weeks.

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  19. http://www.kingworldnews.com/kingworldnews/King_World_News.html

    EXCLUSIVE KWN INTERVIEW:

    WHISTLEBLOWER Andrew Maguire & Adrian Douglas: Discuss What Could Be the Largest Fraud in History - Andrew is an independent metals trader turned whistleblower at the center of a storm for exposing what could be the largest fraud in history involving countries, banks and government leaders. Adrian Douglas Board of Director from GATA, the man who Andrew reached out to joins in this interview where they discuss a fraud so extraordinary and so unimaginable that it is the kind of thing that only happens in hollywood thrillers. They also discuss the CFTC sponsored meeting on metals which was an unmitigated disaster because it additionally exposed the fraud on a grander scale.




    Remember what Gore Vidal said: "Conspiracy is a code word for, 'Unspoken Truth'... paraphrased from memory.

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  20. I'm just amazed that anyone can take this as proof of manipulation. Geez you people are gullible.

    I'll say it again. Every market is manipulated from time to time. That includes the precious metals markets. But any tampering that supresses price below what it would normally be will only cause the market to rise faster than it would normally.

    If there is manipulation of the gold markets then you can thank it for sending gold much higher than it would have been naturally.

    Jim Rogers scoffed when asked if the gold market was manipulated. George Soros and John Paulson are both heavily invested in the precious metals markets. Do you really think these guys would buy into markets they thought were controlled by the government?

    I have to ask, would you rather trust three of the smartest most successful investors in the world or a bunch of conspiracy nuts who clearly don't understand how markets work?

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