Gold’s Tom Clancy-level intrigue — Manipulation of the gold market
The following copy-and-paste is from Agora Financial’s 5 Min. Forecast, for which I thank Agora for permission to reprint.
By Emily Clancy
The gold manipulation story has more intrigue than a Tom Clancy novel (no relation, in case you’re wondering)…
Although it’s the same old story when it comes to investors piling into gold as the economic crap hits the fan, right? As a direct result: When risky stocks plummet, gold floats.
Take for example the most dispiriting month of the Panic of 2008: “The correlation between daily returns on the S&P 500 and gold was minus 41%,” says an article at Medium.
“But during the past month, indeed the worst month for the U.S. stock market since 2008, gold’s correlation with the S&P 500 has been plus 20%.”
The chart above depicts the S&P 500 (blue) along with its market capitalization on the right, and the spot price of gold (outlined in yellow) is on the left side of the chart.
Medium explains: “The only periods when the S&P 500 stopped falling coincided with sharp falls in… gold which were, typically, timed just a few hours before markets closed for the weekend…
The spot price of gold fell by more than 5%… In just a few hours of frenetic futures trading on Friday, Feb. 28… It recovered on March 3, jumping up 3% between 09:36 and 12:21 CDT. But the subsequent rally was short-lived.
“On March 12 (the worst day on global financial markets since 1987) [gold] fell by more than 4.5% and on Friday, March 13 [gold] fell by another, whopping 3.86%.”
“What can explain this bizarre and a-typical behaviour of the gold price?” Medium asks. The answer? “Excessively large single trades.”
Zooming in on one date from the chart above, here’s what happened at the CME’s Comex…
• On Feb. 28, a “coordinated sell-off with 19,849 contracts for April and June futures exchanging between 07:26 and 07:31 CDT”
• Also on Feb. 28 – about two hours later – “some excessively large single trades on April and June futures were executed milliseconds apart: two sets of block trades of 2,499 contracts and one block of 222 contracts (2,499 contracts are worth c.a. $450 million)." (Emphasis ours.)
Would you be surprised then that the bottom fell out of the price of gold on Feb. 28? Down $80 per ounce to $1,570.
In fact, a white paper – published by Paul Craig Roberts and Dave Kranzler – details this phenomenon.
Take one example: “These authors claim that the Federal Reserve instructed its bullion dealers to sell over 4,900 gold contracts on the Globex system in a two-minute period from 02:40 to 02:41 EST [on Dec. 19, 2013], resulting in a $24 decline in the price of gold.”
Medium continues: “Normal conduct is for any large order to be broken into smaller parts, in order to minimize its impact on the market price. But these very large orders are deliberately aiming at quite the opposite effect.
“[This] type of painting the tape on Comex futures… is a manipulative act, but nevertheless it is common behavior.”
Best regards,
Emily Clancy
The 5 Min. Forecast