Living With Rigged Markets

price manipulation

It’s enough that the mainstream financial media seems hell-bent of bashing gold. (Of course, silver gets hardly a mention). But GATA’s Chris Powell has been on a tirade of late, picking apart the lower hanging fruit of these theories and misplaced assumptions, if not outright desperate attempts to rationalize technically driven market prices. 

The following is answer to a gold insider is a must read. 

Powell tells it best, though I think it’s fair to add a few questions to the ones he poses for Mr. Moriarty – which I’ve included below – if anyone were inclined to apply the same misunderstanding about silver price discovery.

No, Bob Moriarty, we don't want to live with market rigging

To hear's Bob Moriarty tell it, GATA has conquered the world and now has more influence on the markets than the central banks we long have been clamoring against.

For in his commentary today, "Capitulation in Gold" --

-- Moriarty writes:

"Speaking of GATA, they have done billions of dollars of damage to investors. Somehow they convinced tens of thousands of people that when gold went from $252 to $1,923 it was being suppressed, and like the gold derivatives time bomb, gold was going to explode one day soon. If someone was manipulating gold from $252 to $1,923, it wasn't down. Actually if you bought lumber or soybeans and they made the same percentage move as gold did from 1999 to 2011 and you didn't sell, it's because you are too stupid to recognize the difference between an investment and a religion."

Yet throughout gold's price rise, the gold market was subject to frequent interventions, most instigated by central banks, that panicked retail longs and allowed the bullion banks, agents of the central banks, to cover their short positions and begin the market-rigging cycle all over again, slowing gold's restoration as a competitive currency. That's not so hard to understand.

As for the investment and religion businesses, Moriarty is in the former but GATA is in neither.

Moriarty continues: "On Sunday night a week ago someone slammed gold when it was at $1,130 and dropped it to $1,080 in seconds. Billions of dollars that nervous investors had put in stop-loss orders on their long positions were wiped out in that time frame. It was deliberate and designed to steal from investors. It is called 'running the stops' and every guy who was ever a commodity broker or stockbroker understands what happened. It's perfectly legal. All those guys who claim to believe that manipulation is the most important issue in investing should have had buy orders well below the November low in gold because that was really predictable."

But if it was "really predictable," where was Moriarty's commentary predicting it? Indeed, where was the commentary of other experienced market analysts predicting it? To the contrary, much commentary following the attack on gold actually found it extraordinary because of the sheer volume and suddenness of short sales, which implied central bank involvement. Such involvement was quickly suspected even by analysts who have never shown any interest in the possibility of surreptitious central bank intervention in the gold market.

As for "perfectly legal," British authorities have arrested a guy who trades S&P futures from the basement of his parents' home outside London, accusing him of causing the May 2010 "flash crash" in the equity markets. The trader has been charged with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of "spoofing," and the "perfectly legal" defense does not seem to have worked for him.

But it does work for governments, which have fully authorized themselves to trade all markets in secret. That's what the U.S. Exchange Stabilization Fund is about --

-- and presumably that is why CME Group, operator of the major futures exchanges in the United States, provides discounts to central banks and governments for their surreptitious trading on CME Group exchanges:

Of course "perfectly legal" does not mean perfectly fair. For should investors in countries purporting to have free markets have to be trading in ignorance against government agencies that are authorized to create infinite money?

Moriarty continues: "I doubt if any of the 'manipulation-conspiracy' people actually care about making money."

That's a good point, though at least in regard to GATA it is not the accusation Moriarty intends. In fact GATA is a nonprofit, federally tax-exempt civil rights and educational organization based in the United States that seeks to expose market manipulation and restore free markets, particularly in the monetary metals. Of course as individuals we'd all like to make money but you can't do that as a nonprofit, federally tax-exempt organization. You do that as an individual or as a business.

Moriarty continues: "Gold shares have been on the block for the last six months. If you were smart enough to buy them, you will be just fine. Sure, some are going to disappear, but while the 'manipulation-conspiracy' people are whining about how terrible it is for a financial product to be manipulated, you are going to own a lot of 10-20-baggers from here."

So there's Moriarty's real grievance with GATA: By warning investors about the rigging of the monetary metals markets and the challenges they face, GATA is getting in the way of his touting the stocks in which he has invested, like the touting contained in the paragraphs immediately preceding his criticism of GATA today.

Moriarty concludes: "All financial markets are manipulated. Live with it."

This observation by Moriarty is actually progress, since, when GATA began, he and others like him denied any manipulation of the monetary metals markets at all. Now that market manipulation is so obvious that anyone who denies it risks losing all credibility, the former deniers can only try to minimize it.

As for "living with" market manipulation, Moriarty is welcome to do so, and maybe he'll grant others the right not to.

In the meantime, no analysis of the gold market is worth anything if it fails to address four questions:

-- Are central banks in the gold market surreptitiously or not?

-- If central banks are in the gold market surreptitiously, is it just for fun

-- for example, to see which central bank's trading desk can make the most money by cheating the most investors -- or is it for policy purposes?

-- If central banks are in the gold market for policy purposes, are these the traditional purposes of defeating a potentially competitive world reserve currency, or have these purposes expanded?

-- If central banks, creators of infinite money, are surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy again?

GATA urges Moriarty and all others who claim to analyze the gold market to answer these questions. Documentation responsive to those questions is available here:

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.


Given that central banks don’t own any silver and have not for decades, the questions might be a bit different:

Are the big banks active and dominate in the commercial category of COMEX futures market?

If so, how did they get there and where are the real users and producers?

Why are these non-producing and non-consuming futures traders allowed to hold unlimited positions? 

Do these same big bank commercial traders actually broker the trades of the other categories of traders, like those of the managed money category? 

Do these big banks also have perfect trading records? How is that possible?

Do they have access to the fastest trading channels to enabling them to front run trades? And spoof trade? 

Do 4 or less of these large big bank commercial traders maintain positioning concentrations that would make the Hunt brothers blush?

Are those positions, by definition, manipulative and illegal on their own - whether “hedged” or not?

And wouldn’t the losses from those supposed  hedges (in a market that has been falling for four years) effect the perfect trading record?

Do they profit from directing the technically driven behavior of the speculators?

Do they often (recently) stop out, or take possession of physical metal for their own accounts. 

Are they not giant nodal points - and share holders of the Federal Reserve?

Those who refuse to ask questions, deny or, oppose the idea that market are manipulated reveal a more sinister agenda, promoting a disservice that feed upon the notion that a system of gambling detached from real world fundamentals is sustainable for the long, intermediate, and potentially very short term. 

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