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Why the metals futures market is a rigged casino
derryb
Posts: 36,215 ✭✭✭✭✭
Yes, this has a very big affect on the price of your physical metal - Consider it artificially low. 
" The mint certificates, the ETFs, and the coins in an investor's safe - all of them - are valued, at least in large part, based on the most recent trade in the nearest delivery month on a futures exchange such as the COMEX. These "spot" prices are the ones scrolling across the bottom of your CNBC screen. That makes the futures markets a tiny tail wagging a much larger dog. A more corruptible and lopsided mechanism for price discovery has never been devised. The price reported on TV has less to do with physical supply and demand fundamentals and more to do with lining the pockets of the bullion banks, including JPMorgan Chase."
Futures contracts are like US dollars - drive their value down by printing more of them:
Infographic - COMEX Gold Futures Market: (note the Fed vault and JP Morgan vault are 80 feet below ground and directly across the street from each other. China recently Purchased the JPM building and its underground vault. It has long been rumored there is a tunnel connecting the two vaults so that transfers between the FED and JPM could be securely conducted. Now the FED can simply conduct the West to East gold transfers with nothing more than forklifts.)
" The mint certificates, the ETFs, and the coins in an investor's safe - all of them - are valued, at least in large part, based on the most recent trade in the nearest delivery month on a futures exchange such as the COMEX. These "spot" prices are the ones scrolling across the bottom of your CNBC screen. That makes the futures markets a tiny tail wagging a much larger dog. A more corruptible and lopsided mechanism for price discovery has never been devised. The price reported on TV has less to do with physical supply and demand fundamentals and more to do with lining the pockets of the bullion banks, including JPMorgan Chase."
Futures contracts are like US dollars - drive their value down by printing more of them:
Infographic - COMEX Gold Futures Market: (note the Fed vault and JP Morgan vault are 80 feet below ground and directly across the street from each other. China recently Purchased the JPM building and its underground vault. It has long been rumored there is a tunnel connecting the two vaults so that transfers between the FED and JPM could be securely conducted. Now the FED can simply conduct the West to East gold transfers with nothing more than forklifts.)
US COMEX Gold Futures Market – An infographic hosted at BullionStar.com
To embed this infographic on your site, copy and past the code belowUS COMEX Gold Futures Market – An infographic hosted at
Give Me Liberty or Give Me Debt
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Worry is the interest you pay on a debt you may not owe.
I'm no expert on the futures market in gold or silver but if the paper can't be converted to physical gold or silver on demand it isn't real and not for me.
I agree but a stock is a stock. I have learned the hard way what "poof" your $$ is gone in stock is like.
I will stick to physical gold.... and silver...Cheers, RickO
My YouTube Channel
mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I think I used my entire monthly data plan opening this thread
mark
A buck just don't go far these days.
Give Me Liberty or Give Me Debt
and
none of the Mints have ever been fully audited
make me sick to be an American. These 2 things alone defines how crooked a people Americans are, and the hypocrisy is we cry foul when other countries don't play fair.
We deserve what we get when foreigners despise us!
Not seeing an issue on the volume part - if the same gold bar is traded 25 times, is that 25 gold bars? No, its only one that changed hands multiple times.
Problem is they're selling the same gold bar to 542 different buyers at the same time (see the posted chart) with these paper futures contracts. The contracts are created out of thin air in hopes of (more likely knowing) that everyone doesn't want their gold bar at once. Sorta like the bank not actually having all the money deposited with them because they loaned most of it out via fractional lending. When there are 542 times as many contracts as there are actual gold, the price of gold naturally falls because CRIMEX, I mean COMEX, has created an imaginary supply. By artificially controlling the "supply" (via futures contracts with no physical backing) of a vary scarce commodity (physical gold) they control the price. Most of the price of physical gold is set by the paper gold spot price. Note that premiums for physical PMs have been creeping up. This is a sign the physical market is moving, although very slowly, towards reality - a price that reflects physical supply. It will take a default by COMEX (inability to honor the unbacked contracts) to break up the fraud. Unfortunately, most all of their contract buyers are in on the scam and settle for cash instead of the gold or they roll the contracts into new contracts.
And, on the topic of fractional bank lending what happens when bank depositors all show up wanting their cash at once? Estimates are that the banks can't even cover 12% of the amount. What affect do you think a negative interest policy (NIRP) on bank deposits is going to do to the number of people who will suddenly show up wanting their deposits back? For this reason there will be a war on holding cash and an effort to switch all the cash in your hands to digital cash that only a bank can control for you. Result: possible banking default due to NIRP problem solved.
Give Me Liberty or Give Me Debt
Knowledge is the enemy of fear
Loving the conjecure of what we don't understand.
Listen and learn.
Give Me Liberty or Give Me Debt
If you're having trouble understanding tail risk, you should read Mark Spitznagel's "The Dao of Capitalism". 7 straight years of ZIRP destroys capital instead of luring it back into productive use. If this doesn't cause concern, I would suggest that you review the "boiling frog" syndrome. How long will it be until the US is directly affected? I would suggest that we have already been tagged with a few glancing blows and this is readily observable in terms of the decline of the white middle class. Yeah, I said it.
I knew it would happen.
So if the paper gold system is on thin ice, doesn't that make the price of physical gold (owned by an individual) just as risky?
Guess its just like the past housing market. Everyone enjoying the ride, hoping it won't all crumble while they are
holding.
(If you told everyone what the real world was like, they would take the blue pill. Put me back in the matrix.)
If you believe this then just buy highly liquid forms of physical with cash and wait.
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If you believe this then just buy highly liquid forms of physical with cash and wait.
I do believe this and that's exactly what I'm doing.
Worry is the interest you pay on a debt you may not owe.
some hedge fund or some Russian zillionaire would be buying gold futures with a plan to take delivery
and create the short squeeze of the century?
Goldman Sachs, for instance, was shorting synthetic sub prime mortgage derivatives at the same time the firm
was selling the same securities to institutional clients.
Why, in light of the information, is there no squeeze?
Why, in light of the information, is there no squeeze?
because of the devastation that a runaway gold price would create for all currencies, not just the US$. Gold's threat against currency values is the primary reason illegal manipulation of gold is overlooked, and why I believe even encouraged. A squeeze is not necessary to reap huge profit when you can make the price go up and down on your command. A squeeze is a one time profit opportunity. Price manipulation is a perpetual cash machine. I imagine the profits booked by the manipulators in the past ten years would be unbelievable.
Give Me Liberty or Give Me Debt
If you believe this then just buy highly liquid forms of physical with cash and wait.
I do believe this and that's exactly what I'm doing.
You are not alone.
Give Me Liberty or Give Me Debt
Why, in light of the information, is there no squeeze?
because of the devastation that a runaway gold price would create for all currencies, not just the US$. Gold's threat against currency values is the primary reason illegal manipulation of gold is overlooked, possibly even encouraged. A squeeze is not necessary to reap huge profit when you can make the price go up and down on your command. A squeeze is a one time profit opportunity. Price manipulation is a perpetual cash machine.
If there was such a profound imbalance in the market, someone would exploit it. Someone who wouldn't care about the "devastation." Russia or North Korea perhaps.
In reality, the US $ has never been more highly valued. Investors are willing to loan the US Treasury dollars for 30 years at 2.8%/yr.
Physical gold is too valuable to be left gathering dust in a warehouse. Holders have removed their gold so that they can earn money loaning it.
Think of it this way, I have $251 in my wallet and $0.83 in coins. This is available for immediate use. If I need more money, I can write a check for much more money.
The money is available when needed. Same with gold. If it was otherwise, the price would skyrocket. It has not.
Why, in light of the information, is there no squeeze?
because of the devastation that a runaway gold price would create for all currencies, not just the US$. Gold's threat against currency values is the primary reason illegal manipulation of gold is overlooked, possibly even encouraged. A squeeze is not necessary to reap huge profit when you can make the price go up and down on your command. A squeeze is a one time profit opportunity. Price manipulation is a perpetual cash machine.
If there was such a profound imbalance in the market, someone would exploit it. Someone who wouldn't care about the "devastation." Russia or North Korea perhaps.
In reality, the US $ has never been more highly valued. Investors are willing to loan the US Treasury dollars for 30 years at 2.8%/yr.
Physical gold is too valuable to be left gathering dust in a warehouse. Holders have removed their gold so that they can earn money loaning it.
Think of it this way, I have $251 in my wallet and $0.83 in coins. This is available for immediate use. If I need more money, I can write a check for much more money.
The money is available when needed. Same with gold. If it was otherwise, the price would skyrocket. It has not.
You forget that in order to let gold run wild you destroy the value of all those US Treasury bonds that your country has invested in. It's a balancing act and China has so far carried it out successfully - decreasing its holdings of US debt while stockpiling gold.
The US$ is not so highly valued these days as foreign sales of T bonds is drying up. The largest buyer of government debt has become our own central bank. It does not bode well for gold that the largest holder of US debt is the very same organization best positioned to "dictate" the price of the dollar's top competition.
The role of the US dollar as the world's preferred currency (the petrodollar) for many years has insured a great demand for physical US dollars to be held by the central banks of many nations and has been dollar strength's true backbone.
Many countries are moving away from use of the petrodollar in international trade, now accepting gold or the Yuan. At least two countries that threatened or attempted to move away from the petrodollar in very recent years (Libya and Iraq) have been "convinced" to abandon their plans. Protecting the status of the dollar has been the top priority of worldwide US diplomatic and military effort for many years. It is a battle the US is now losing. After all of the overt and covert efforts to protect the dollar on the international scene, it would be naive to think that steps to control the price of it's nearest competition are out of the question. If one does not accept the military's role in economic enforcement he/she needs to read the words of two time medal of honor recipient Gen. Smedley Butler,, the most decorated US Marine in history.
Until gold pricing breaks free from it's artificial pricing mechanism it will continue to move as it has. The period following the 08 crisis gave us a glimpse of "price discovery" when metals "temporarily" reached new highs. The free market will eventually set the price of anything. It always has and, until it is completely destroyed, always will. For now I continue to bet that the free market will prevail. But hey, I'm flexible and can change that view when I see things that convince me otherwise.
Give Me Liberty or Give Me Debt
Russia is a large producer of gold and would enhance its world
position if Western currencies experienced a crisis. I don't believe Russia has much at risk
in dollars or US Treasury securities.
What is stopping them from a squeeze?
These stories about missing gold have been around for years. If it was true, gold would skyrocket.
Russia is a large producer of gold and would enhance its world
position if Western currencies experienced a crisis. I don't believe Russia has much at risk
in dollars or US Treasury securities.
What is stopping them from a squeeze?
It has nothing to do with missing gold and everything to do with enforcing dollar hegemony. The short squeeze is a one time profit opportunity. Rest assured that our "enemies" will and are attacking us economically. After all, it's how we brought down the Soviet Union empire.
Give Me Liberty or Give Me Debt
Not to mention their constant electronic attacks on our banking system, power grid, corporations and security systems.
I knew it would happen.
Why, in light of the information, is there no squeeze?
because of the devastation that a runaway gold price would create for all currencies, not just the US$. Gold's threat against currency values is the primary reason illegal manipulation of gold is overlooked, and why I believe even encouraged. A squeeze is not necessary to reap huge profit when you can make the price go up and down on your command. A squeeze is a one time profit opportunity. Price manipulation is a perpetual cash machine. I imagine the profits booked by the manipulators in the past ten years would be unbelievable.
Sounds like a losing game all around for those not in control. So why own gold?
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Why, in light of the information, is there no squeeze?
because of the devastation that a runaway gold price would create for all currencies, not just the US$. Gold's threat against currency values is the primary reason illegal manipulation of gold is overlooked, and why I believe even encouraged. A squeeze is not necessary to reap huge profit when you can make the price go up and down on your command. A squeeze is a one time profit opportunity. Price manipulation is a perpetual cash machine. I imagine the profits booked by the manipulators in the past ten years would be unbelievable.
Sounds like a losing game all around for those not in control. So why own gold?
Because the free market will eventually determine price - it always has.
My personal reason for stacking is to have a dollar insurance policy.
Give Me Liberty or Give Me Debt
Loving the conjecure of what we don't understand.
.
Loving the conjecture that I don't understand.
Knowledge is the enemy of fear
Loving the conjecure of what we don't understand.
.
Loving the conjecture that I don't understand.
Knowledge is the enemy of fear
These stories about missing gold have been around for years. If it was true, gold would skyrocket.
Russia is a large producer of gold and would enhance its world
position if Western currencies experienced a crisis. I don't believe Russia has much at risk
in dollars or US Treasury securities.
What is stopping them from a squeeze?
It has nothing to do with missing gold and everything to do with enforcing dollar hegemony. The short squeeze is a one time profit opportunity. Rest assured that our "enemies" will and are attacking us economically. After all, it's how we brought down the Soviet Union empire.
Cool. So if the US is suppressed for 50 years with no technological advancement and not enough food to feed our citizens, then we too can be "brought down".
I am 100% confident that y'all are gonna be dead before that happens.
Knowledge is the enemy of fear
Give Me Liberty or Give Me Debt
My personal reason for stacking is to have a dollar insurance policy.
derryb,
Respectfully you might have started out with the above intentions but now we all know it has become more than that. You love the game, the thrill, etc... and there's nothing wrong with that.
We appreciate you on the boards.
Successful card BST transactions with cbcnow, brogurt, gstarling, Bravesfan 007, and rajah 424.
My personal reason for stacking is to have a dollar insurance policy.
derryb,
Respectfully you might have started out with the above intentions but now we all know it has become more than that. You love the game, the thrill, etc... and there's nothing wrong with that.
We appreciate you on the boards.
I have different reasons for trading both physical and paper. My stack is in a different pile, locked away for the long term. Everything else remains on the table. My stack is funded by the non-stack profit. When a trade is not profitable, don't make it. Wait for it to become profitable.
Give Me Liberty or Give Me Debt
My personal reason for stacking is to have a dollar insurance policy.
derryb,
Respectfully you might have started out with the above intentions but now we all know it has become more than that. You love the game, the thrill, etc... and there's nothing wrong with that.
We appreciate you on the boards.
Indeed. Derryb does love paper metal more than physical. Dont let him kid you. Imagine bring buried in physical silver for a decade vs the endless opportunity in trading paper both long and short. Who has stacked more, the paper boys or the physical fellas?
Knowledge is the enemy of fear
Those who see (and those who control) the price manipulation (the beatdowns every time it recovers) and let the paper churn the profit. There are two plays with metal, the short term and the long term. Enjoy them both, but realize the difference.
Your question reinforces the argument that the price manipulators are profiting from the volatility that they create.
Give Me Liberty or Give Me Debt
Everything goes up and down. If one wants to jade critical and rational and logical thinking and analysis with manipulation and conspiracy theories then have it.
One will be much more successful with a free and clear mind.
Knowledge is the enemy of fear
Manipulating the gold market is necessary to maintain liquidity in the government bond market. If government bonds aren't fungible, everyone in the government complex and all of their associated side-businesses would quit - end of story. Gold is the only objective way to keep track of what governments are up to with their financial shenanigans, and gold can't be allowed to accurately reflect how badly the governments are mis-managing the debt that they all owe.
If gold were allowed to seek it's own level, bonds would crash. Gold is the only competing currency that's not fiat, and you can bet the farm that governments won't allow it to win vs. their bonds.
Governments really don't care about the nominal value of gold, but they do care about their bonds and how much debt they can get away by issuing, thereby leaving their taxpayers holding the collective bag. It's a pernicious arrangement. Along the way, values get warped and if you don't join the game, you are an outsider with fewer options. It's always been that way, in one form or another, but mass communication and electronic data aggregation are accelerating the trend toward a great big happy conclusion - and there's no telling what that means for regular folks who aren't connected to the government teat.
The only reason they care about gold at all is because it can bring focus to the game. That's the only reason. When you own the world's reserve currency, you have the power to financially reward friends at no cost and put the squeeze on your enemies at no cost. When you no longer own the world's reserve currency, you no longer have the power. Don't think for a second that governments want to give up any power.
They would let gold float on the open market, except in that it illustrates the actual worth of their currencies. If you can knock the price of gold down with a few thousand paper contracts backed by virtually nothing, or even freshly keyboarded dollars, so much the better. Easy peasy.
It truly is a game of musical chairs, and the referees are corrupt. So, who do you trust, your own planning & intuition - or the banks & central planners? After all, they've done such a stunning job so far.
Shoot, I could go on and on like this all day.
I knew it would happen.
..........Shoot, I could go on and on like this all day.
There's no need. As the old saying goes, "A man convinced against his will is of the same opinion still".
Are you incriminating yourself derry?
Everything goes up and down. If one wants to jade critical and rational and logical thinking and analysis with manipulation and conspiracy theories then have it.
One will be much more successful with a free and clear mind.
Jading critical, rational, logical thinking and analysis (the fundamentals) with manipulation and conspiracy theory makes a metals player much more successful than if he had based his strategy on strictly those fundamentals.
After all, where would the price of metals be based on the fundamentals? Realizing what is really driving prices in the metals market is much closer to reality and provides the player with a better understanding of what short term prices will actually do - not what they should do.
Give Me Liberty or Give Me Debt
Believing in conspiracy and manipulation persuaded folks to buy silver at 40, 35, 25, 20. A clearer view of market dynamics and inter-market relationships, and a truer understanding of fundamentals would have prevented poor investment decisions.
Knowledge is the enemy of fear
Once you accept the fact that the true fundamentals are never going to be public knowledge and that the market administrators are totally corrupt, you can still manage your finances independently without being slammed.
Stay liquid, don't go too far out on a limb with leverage (unless you're 40 or under), keep a healthy cash reserve, pay off your debt, keep your job (especially if it's a good one), stay connected to some of the better bullion dealers, follow the spreads on the bullion types you like, and keep good spreadsheet records.
Just because you're paranoid, it doesn't mean that they're not out to get you.
I knew it would happen.
Unfortunately most of the "fundamentals" are nothing more than conspiracy and manipulation theory. Once one discovers the true fundamentals, the noise of conspiracy and manipulation disappears thus allowing for more accurate evaluation.
Believing in conspiracy and manipulation persuaded folks to buy silver at 40, 35, 25, 20. A clearer view of market dynamics and inter-market relationships, and a truer understanding of fundamentals would have prevented poor investment decisions.
Believing in "fundamentals at work" is what led folks to buy silver at high prices.
Revelations in recent years have proven conspiracy and manipulation are no longer theory. True fundamentals are not at work in precious metals just as they no longer exist in many other asset classes. If they were, metal prices would be higher. I know this and you know this.
$48 silver was fundamentals temporarily at work. This was possible only because of the market chaos following 08 crisis. Once the conspirators and manipulators were able to regain control, prices were "brought" back down to earth. This control required convincing the sheep that "all is good" through the use of taxpayer bailouts, interest rate manipulation, and control of the financial press that required wasting (and giving away) trillions of taxpayer dollars. Note that manipulation of interest rates and the financial press, among other things, helped to create the housing crisis.
The Federal Open Market Committee is the king of manipulators. It is their primary mission to prevent and to eliminate "market uncertainty" and as shown, they have many tools to work with.
Many independent buyers now have a clearer understanding that fundamentals are not currently at work and they realize that fundamentals can only overpower the manipulation and conspiracy in the face of market uncertainty. As demonstrated by the housing crisis that led to the 08 crisis, manipulation and conspiracy ensures eventual chaos in a market under such influence. It is closer, once again, than most people realize.
Two plays here: Stack for the next loss of control by the manipulators (it's happened before) and smartly use knowledge of the manipulation to "paper play" the sideways volatility. Hisotry shows that markets always, determine their own prices. The more conspiracy and manipulation thrown at them, the longer it takes. Unless markets are completely destroyed they will outlast the tools used to fight them.
Give Me Liberty or Give Me Debt
I will stick to physical gold.... and silver...Cheers, RickO
There is nothing inherently crooked with selling a contract to deliver a certain item, at a certain price, at a certain date in the future. This concept introduces some form of stability and liquidity to nearly every market from gold and silver to orange juice and pigs.
There are two things that are brought up almost every time that I would like to try and address. First is the question of volume of contracts traded vs gold mined, and second is the idea that the contracts are just worthless paper.
Comparing contracts written to gold mined, or even gold that exists is not appropriate. Volume is tracked per transaction. If I sell a contract, then buy it back - that counts as 2. The contract traded twice, but it sure doesn't mean that I owe anyone 2 gold bars. I created a debt and eliminated a debt. If I did that back and forth 5 times, some people would try to tell you that I'm promising TEN gold bars. Nope. Zero.
If person A and person B decided to bet on a coin flip at $20 per turn, and each person won 5 times, you wouldn't claim anyone 'created' $200 out of thin air. If I spent a $20 bill at my local grocer, who then spent it with the pharmacist, who then bought a sandwich from the butcher, who took it home and gave it to his daughter, who then spent it on shoes - no one would mutter about price manipulation, but futures contracts trade almost the same way.
The second concern that is often brought up is that the futures contract itself is just an empty promise. It isn't. To write, or to sell short, a futures contract, requires the assumption of debt. If I write a futures contract I'm promising to deliver 100 ozs of gold at an agreed upon price at an agreed upon date. I have until that date to either buy a contract back to cancel it out, or to deliver my gold to the counter party to my contract. I don't have to have the gold in my pocket, I just have to have the means to get it to you. For the system to work, you have to trust that I am good for it. You also have to be able to later sell the contract you bought from me if you so choose. You need the future buyer to trust YOU, but all YOU have is MY promise, etc etc. That sounds scary to people, but that's what exchanges/clearing houses are for - to guarantee the trade. To make the contracts fungible. You don't HAVE to know me. You just need to know that the exchange guarantees that there is a broker out there that guarantees, that I have the money to make good on my contract. If I don't, they'll step in and cover it. Simple.
Anyone that doesn't believe it - buy a futures contract and let it expire. You will absolutely find out that there is a bar of gold waiting for you that you can go pick up. (If you don't have a ton of cash, you might want to try with a 5,000 oz contract of silver instead) The process of picking up the gold is a severe PITA - but it can done. (and will be done if you want it to be)
One final point. An interesting thing about futures contracts is that you can take either side of the bet for very small fees. If you think buying gold futures is a total scam and rigged, well then, you can SELL gold futures instead. At any given moment, a gold futures contract has a spread that is at most, $20 wide. We're talking about a whopping $20 difference in the buy/sell prices for a contract with a $120,000 nominal value - and you can be on any side of the bet you'd like. How can that be 'rigged?'
What I will concede is that owning a futures contract is no replacement for owning physical gold stored somewhere safely. One can be useful in an emergency, and represents a real, anonymous store of value. The other is an incredibly liquid, fungible instrument that can be rapidly traded in whichever direction you choose for immediate profits, or losses. Neither is a "scam."
"But puttogether," I can hear you saying "how do we know those nasty COMEX people will live up to their promises?" I've got two answers for you. 1) Try it yourself. 2) Find one instance of a trader who took a gold, silver, or platinum contract to expiration and the COMEX refused to deliver the metal. ONE INSTANCE where it didn't happen. You'll hear tons and tons of "bbbbut bbut the bogeyman wrote contracts on gold he didn't have" but you'll be very hard pressed indeed to find a recorded account of an exchange taking someone's money, and not giving them their gold.
"But what happens if every person on earth shows up and wants their gold all at the same time?" Possibly the same thing that happens if everyone in your town wants a case of bottled water all at the same time. There might be trouble and some delays, but I suspect it would eventually be worked out. This is one reason why owning a futures contract is NOT the same as owning physical gold. Not being the same as physical gold is not the same as being a scam either. They just serve different purposes.
There is way more to this, and I'm happy to go back and forth and share my experiences or answer questions about how it has all worked for me if anyone is interested. Just remember. If the prices are so obviously rigged, you can go take advantage of them too. No rule says you can only BUY the contract. If you can PROVE the market for paper gold is headed downward......by all means, go sell some gold and get RICH.
For once, a learning lesson to all of us that are "under educated" in how the futures markets really work, w/o the standard conspiracy or manipulation garbage. Thank you
Thanks
Successful card BST transactions with cbcnow, brogurt, gstarling, Bravesfan 007, and rajah 424.
...gold is missing from vaults,
...gold price is manipulated and artificially too low,
...banks are going to fail soon,
...depositors will not be insured,
...US Treasury will not repay debts,
...COMEX will default and gold contracts will be voided.