Manipulation is Real – Evidence is Emerging!

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Libor was manipulated by traders (with some collusion of Senior Bank Managers) according to WSJ article today. Could this mean that Gold and Silver are also Manipulated? I think so!

A group or network or Traders can use their HFT computers (high-frequency trading) to manipulate the markets for their personal financial benefit. The evidence is now emerging from numerous sources that manipulation of Libor rates (yen-libor, euro-libor, dollar-libor, etc.) occurred by submitting false data to the panels who create these global benchmark rates. All this manipulation is now possible as Traders can network globally and use their Algorithms to manipulate Data and Information. For example:  If I desire to manipulate the Price of Silver, I could form a network of like-minded Traders (located at various venues around our planet) to coordinate a Price manipulation scheme of the metal Silver. A real-time algorithm could be devised to be executed simultaneously by this select network of Traders for the purpose of driving the Price of Silver down (for a time) and then driving it up (later). This change is Price would provide profits on the way Down and later on the way Up. All this is now possible given the new technology of HFT (high-frequency trading).

The TWO huge and mostly reputable Banks involved with this Libor scandal appear to be UBS (a Swiss Bank) and Barclay’s (a British Bank). Regulators now expect many additional billions in law suits to follow from this revelation of manipulation. Traders are now being identified from a network which were involved in the scheme. This same type of Trading behavior is very likely the culprit in the manipulation of Gold and Silver prices. High-Frequency Trading (using programmed algorithms) are tools which could be used (assuming a group of like-minded traders) to create manipulated Prices (selling ‘short’ in a coordinated scheme and then buying ‘long’ when the prior price decline has run its course). In other words, Traders can make huge profits by selling ‘short’ and then additional huge profits when buying ‘long’. Coordinated trading via Algorithms could be the culprit in the manipulation of Gold and Silver. Think about a group of Traders (whether selected by Central Banks or merely within select Commercial Banks) forming a plan to manipulate a particular commodity within a particular sector of the market. It’s very realistic and possible today given the type of real-time markets we now have along with HFT computers.
 Trader on the phone with his group of manipulators
The huge change in our technologies (where some 70% of all trading volume is now done via HFT) has created the opportunities for schemes of collusion and manipulation of the markets (interest rates and prices). Trading now is mostly done within Cyberspace and via Virtual units of currency (dollars, et al). The computer screen has replaced the ‘printing’ of paper currencies for trading, investing, speculation, and exchange. All global trades are now mostly Virtual units of currencies which are traded on Virtual Stock Exchanges. Currency units are traded at near the speed of light via cable transmission and/or satellite transmission. We now live in a World of real-time trading, investing, speculating, and currency exchanges. This new World of HFT and other high-speed retail trading has changed our markets. Money is now mostly Virtual and Central Banks can now create these Virtual units via a policy decision (example: Bernanke’s QE operations).
Traders at Getco  (32% of trading volume) all use HFT for their trades and speculations
Have you noticed that the Price of Gold and also Silver seems to fluctuate in ways which suggest that some ‘price’ manipulation is occurring? These metals can be difficult to accumulate (physically) in real-time due to a shortage of supplies, yet the ‘price’ of these metals often declines during these periods of shortage. Does this represent a normal supply/demand market? Are the forces of supply and demand setting these ‘prices’ or is there some collusion and ‘manipulation’ occurring? My personal sense is that there is ‘manipulation’ of the gold and silver markets on a regular basis. This evidence is growing daily! Who would have a self-interest in this manipulation? Could a network or group of Traders be colluding to create these ‘price’ fluctuations (down and up)? Could some select Commercial Banks be involved in ‘price’ manipulation (for their proprietary gain)? Could this manipulation go all the way to the top policy-makers within select Central Banks (who may desire that these precious metals not appreciate noticeably)? Who really knows at this point? My sense, however, is that MANIPULATION is occurring within these markets!!!
This expert (Eric Sprott) seems to think that the Silver price is being manipulated
Experts at GATA (Murphy and Powell) have substantial evidence of ‘price’ manipulation
My sense is that we will continue to witness this manipulation of Gold and Silver prices going forward. Eventually, however, I do think that the upward ‘price’ manipulation will WIN over the DOWNWARD ‘price’ manipulation. Right now the downward ‘price’ manipulation is winning in the gold/silver markets. At some future date (unknown to anyone), however, I do think that the prices of gold and silver will skyrocket to new historical highs. This could happen in 2013 as the general stock markets start there decent into oblivion. Watch the markets as we enter 2013 and then as the financial crisis of debt grows and grows (with no solution in sight)!
We eventually could see the ‘price’ of a one ounce silver coin reach $200 and a one ounce gold coin reach $5000. The foundation of Capitalism is the concept of ‘value’. Historically, money has been a proxy for ‘value’. Money has always been some ‘thing’ physical (material). Today, our money units are paper (4%) and virtual (96%). These units are mostly ‘worthless’ and ’meaningless‘  for the ‘valuation’ of assets and collateral in the longer term. As our global  financial crisis grows and as awareness of this ‘nature’ of money grows, I would suspect that the big boys in the markets will ‘run’ for the physical units and reject the virtual units. We could see the beginning of this trend in 2013. Watch my blog site and the price of gold/silver going forward! That is my missive for today! I AM: http://kingdomecon.wordpress.com.

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avatarDon Swenson - Kingdom Economics posted Thursday, December 20th, 2012.

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