-- Posted Friday, 14 December 2012 | | Source: GoldSeek.com
Those
who follow the day to day developments in the gold and silver markets
have typically seen rampant market manipulation by large traders and
bullion banks.
Although
supposedly against the rules — and even being subjected to an ongoing
investigation by the CFTC that now reaches into its fifth year — this
market bullying is nevertheless allowed to happen over and over again
without effective regulatory intervention.
Some
of these big players even employ algorithmic trading systems to move
into and out of the market faster than any human can. The transactions
initiated by these computerized trading programs happen rapidly and
often in huge size.
Algorithmic Trading Contributes to Manipulation
Despite
these challenges, both precious metals have been able to rise over the
last decade, so the real question is how high the prices of silver and
gold would be if the market had not been subjected to recent downside
price volatility?
The
bullion banks typically need only a minute — as their algorithms
quickly trade tens of thousands of Comex futures contracts — in order to
induce a dramatic shakeout of weak long positions.
According
to Nanex, that is an average of 200 or more contracts traded per
second. Furthermore, these sharp moves almost always occur just prior to
the trading pit’s open, which is a time frame when the algos tend to
dominate the market.
As a very well-informed discussion forum writer contributing under the name James Mc of GATA Chairman Bill Murphy's Lemetropolecafe recently noted on November 28th:
"Unlike
last Friday, when it took over 165,000 contracts trading to net a gain
of $23.20, gold fell $25.60 between 8:20 and 8:21 AM this morning.
Furthermore in just 5 minutes (8:20-8:25AM) a whopping 21,205 contracts
traded. No long would ever dream of unloading a position in this manner"
Basically,
only a very deep-pocket entity, cartel, or bullion bank aided by an
intimate knowledge of where the sell-stops are located could make this
happen with the help of algorithmic trading.
This
price action effectively negated yet another widely observed technical
breakout, which is the result that the manipulators typically accomplish
in the market’s managed retreat toward ever higher and higher precious
metal prices.
Predictable Trading Patterns Observed
For
years, it was GATA speaking out as the lone voice against this
practice, but now ZeroHedge has somewhat begrudgingly brought the issue
to its fight club by pointing out the increasingly obvious pre-opening
trading pattern typically employed by a large “not-for-profit”.
A review of the predictive trading patterns shows these tendencies:
· On most trading days, gold and silver prices are bombed just before the Comex market opens.
· Fresh speculative longs get washed out, creating sentiment "at the margin" — which is poor.
· The price of both metals gets crushed at and around options expiration.
· If
one metal trades higher or looks stronger, it matters little, and they
are not allowed to follow each other higher. For example, over the past
few weeks, silver has traded relatively strongly, but gold was leaned on
despite this strength.
· Over
and over, the HUI or the miners index, works as a tip off indicator.
When the mining index is weak, the likelihood of a manipulative raid the
following day rises substantially.
This
all reflects the real interests working behind the scenes to move gold
and silver prices in ways that suit their manipulative purposes. Not the
Fiscal Cliff, the FOMC meetings, the Debt Ceiling, nor any other well
publicized geopolitical crisis. Precious metals pricing happens in the
pits, apparently oblivious to world events or actual physical demand.
For
more articles like this, and to stay updated on the most important
economic, financial, political and market events related to silver and
precious metals, visit http://www.silver-coin-investor.com
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