How the precious metals markets are manipulated

This week in our musings, we bring you some slightly more unusual items that we have found interesting….

• Central Banks Buy Gold
• A master bullion trader sets the CFTC straight on manipulation
• Treasuries Riskier Than Toilet Paper!
• Fed-up Mainstream journalist starts web-site

Central Banks Buy Gold

From the Daily Bell comes this report….

Central banks around the world added 425.4 metric tons of gold to their reserves last year, the biggest increase since 1964, according to the World Gold Council. That represents a 1.4 percent gain to put their holdings at 30,116.9 tons in total. The increase was the first since 1988. Central banks in India, Russia and China were among those boosting their gold reserves last year, as the precious metal jumped 24 percent, hitting a record of $1,226 an ounce in December. Central banks now possess 18 percent of all gold ever mined. “There’s clearly been a renaissance of gold in central bankers’ minds,” Nick Moore, an analyst at Royal Bank of Scotland, told Bloomberg. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.” Many are now singing gold’s praises, with the precious metal up about 3 percent so far this year. “Gold is quietly, at the edge, becoming the world’s second reserve currency, supplanting the euro and rivaling the dollar,” money manager Dennis Gartman wrote in his Gartman Letter, obtained by Bloomberg. “The trend shall continue months, if not years, into the future.” – MoneyNews 

Dominant Social Theme: Gold is good?

Free-Market Analysis: So now the West’s central banks are buying gold. They couldn’t sell enough of it when the yellow metal was priced around US$250 just about a decade ago. But now that it is well over US$1,000 they can’t buy enough. This alone should disabuse people of the notion that central bankers are wise and efficient utilizers of the vast money power that they have control over. Like the rest of us, central bankers sell low and buy high.

 

A Master Bullion Trader Sets the CFTC Straight on Manipulation in the Metals Markets

A good friend of mine in London, Andy Maguire, has traded the bullion market successfully for many years. He has been documenting the manipulation taking place in the metals market for quite some time now and has informed the CFTC along the way. This week on Thursday the CFTC held a seminal hearing to consider position limits, notice of which was the signal to Andy to step up his efforts. GATA have observed this and publicized it. It will be interesting to observe the outcome…..

A London trader walks the CFTC through a silver manipulation in advance

Submitted by cpowell on Thu, 2010-03-25 23:41.

Additional Statement by Bill Murphy, Chairman
Gold Anti-Trust Action Committee

to the U.S. Commodity Futures Trading Commission
Washington, D.C., March 25, 2010

On March 23, 2010, GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Maguire is a metals trader in London. He has been told first-hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.

In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events.

On February 3 Maguire gave two days’ warning by e-mail to Eliud Ramirez, a senior investigator for the CFTC’s Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5. On February 5, as market events played out exactly as predicted, further e-mails were sent to Ramirez while the manipulation was in progress.

It would not be possible to predict such a market move unless the market was manipulated.

In an e-mail on February 5 Maguire wrote: “It is common knowledge here in London among the metals traders that it is JPM’s intent to flush out and cover as many shorts as possible prior to any discussion in March about position limits. I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC’s allowing by your own definition an illegal concentrated and manipulative position to continue.”

Expiry of the COMEX April call options is tomorrow, March 26. There was large open interest in strikes from $1,100 to $1,150 in gold. As always happens month after month, HSBC and JPM sell short in large quantities to overwhelm all bids and make unsuspecting option holders lose their money. As predicted by GATA, the manipulation started on March 19, when gold was trading at $1,126. Last night it traded at $1,085.

This is how much the gold cartel fears the CFTC’s enforcement division. They thumb their noses at you because in more than a decade of complaints and 18 months of a silver market manipulation investigation nothing has been done to stop them. And this is why JPM’s cocky and arrogant traders in London are able to brag that they manipulate the market.

This is an outrage and we are making available to the press the e-mails from Maguire wherein he warns of a manipulative event.

Additionally Maguire informed us that he has tape recordings of his telephone communications with the CFTC, which GATA are taking the appropriate legal steps to acquire.

Bond Market Verdict: Treasuries Riskier Than Toilet Paper!

by Mike Larson of the Money and Markets blog

[Ed: I have respect for Mike Larson; he’s a key analyst at Weiss Research, and has his finger on the pulse of the bond and real estate markets. Emphasis below is ours.]

I have a lot of respect for Warren Buffett. As has been noted by many, he’s one of the world’s best long-term investors. He has a knack for buying low and selling high. And his Berkshire Hathaway holding company has been a great multi-year performer for investors.

It has amassed stakes in everything from the Geico insurance firm to the manufactured home company Clayton Homes to the Dairy Queen restaurant chain.

But Buffett can’t levy taxes on Americans. He can’t wage war in far corners of the world. He isn’t responsible for your Social Security checks. He doesn’t operate the National Park System or make sure the drugs we take are safe. That’s the job of the federal government.

And yet, a remarkable thing occurred recently in the bond market …

Berkshire‘s cost of borrowing fell BELOW Uncle Sam’s! Ditto for Procter & Gamble, the company behind brands like Tide detergent and Charmin toilet paper … Lowe’s, the home improvement retailer … and Johnson & Johnson, the firm that makes Band-Aids, medical devices, and baby shampoo, according to Bloomberg.

Bottom line: Bond investors are now viewing Treasuries as riskier than a vast array of corporate debt. They’d rather own bonds backed by sales of toilet paper than the full faith and credit of the United States. If that’s not a sign of how low we’ve sunk, I don’t know what is!

[On the other hand, one might regard toilet paper as more important than a bloated government – Ed.]

 

Fed-up Mainstream journalist starts new web-site

Paul Farrell has been writing for  Marketwatch for a long while, and thus might be considered as a mainstream journalist . However, he has started up his own website, http://wallstreetwarzone.com , I guess to better publicize what he sees as what we might term, to borrow a term from Max Keiser “Rigged Market Capitalism”. This website is carrying some definitely non-mainstream material, as we see below…..

“The Happy Conspiracy:” a Brief History of America’s “Shadow Government,” Quants, Behavioral Economists, Brainwashing, Propaganda, Nobel Prizes, Psych-Ops Warriors & a New “Science of Irrationality!”

by Paul B Farrell, JD, PhD

The average Main Street investor is at a distinct disadvantage … you are running a handicap race. If you’re one of America’s 95 million Main Street investors, the odds are better than 100:1 against beating the averages, thanks to the enormous firepower of Wall Street’s War Machine. And the gap’s widening, getting worse every day, now that Wall Street’s arming itself with the ultimate weapons of mass manipulation—behavioral finance, the psychology of investing, neuroeconomics, and the new science of irrationality.

On cable, in ads and sales pitches Wall Street pander to your ego with an outdated idea: You’re “the man,” a “rational investor!” Yes, you’re different, you can beat the averages, the indexes. But behind your back, they’re laughing at you, they know you’re irrational when it coming to investment decision-making. Moreover, they actually prefer a market filled with naïve, uninformed and irrational investors. That way, they can easily manipulate you—usually without you ever really knowing it. Oh, they’ll let you make modest gains, enough to keep you in line, to prevent a full-scale rebellion.

But the playing field’s not level and they’re backed by an elite force of a million experts in the financial industry—brokers, salesmen, advisers, analysts, talking heads, slick admen, slicker lobbyists—foot-soldiers and mercenaries armed with superior tools, advance data, huge monetary incentives, and the protection of friendly legislators and regulators, all calculated to feed the anxieties and addictions of American investors. But you already knew all this, right. Since the Buttonwood Agreement created the New York Stock Exchange back in 1792, Wall Street has always been able to control the markets and manipulate investors to its advantage. It’s been a long “one-way street” for a long time.

Happy Conspiracy’s powerful new “psych-ops” weapons

So what is new? Behavioral finance, the new science of irrationality, also known as neuroeconomics, behavioral economics, quant-trading and the psychology of investing. Wall Street has been rapidly adding these new “weapons-of-mass-manipulation” to their arsenal in recent years. With these new psychological weapons, Wall Street has refined “mind control” to a high art better than anything at the CIA and the Pentagon. Why? Wall Street wants to make it absolutely certain you don’t stand a chance against them…..