I had read Casey's piece, but quickly lost interest in it at the argument that the 'gold market is so
big' it cannot be manipulated
by the poor weak central banks and their surrounding commercial banks who are practically bankrupt.
If someone is a value sophisticate in a segment of the market,
but does not understand
and have concern for the power of the Federal Reserve and its associated banks being able to print money at will, then
it is probably
good advice to stick what
you do know, and leave
the economics for someone
else. The saying that control of the money supply
is a powerful tool has been around so long that it has become proverbial.
As for the size of the gold market, it is tiny
relative to the financial markets.
Consider the enormous
size of the international currency markets. Or the bond markets.
Do the central banks manipulate
them? Did Citi not get caught blatantly shoving Euro bond prices a few year ago? Of course they did. They
just don't get caught at
it unless they get clumsy.
Prices in a market are
set at the margin
or 'on the float' in the day
to day trade. All a large trader or group of traders has to do is manage that margin and the market will follow. If one looks at the amount of daily trading done on the LBMA in daily
volume relative to the amount of physical gold changing hands,
the answer is fairly glaring.
They may not be able to resist the primary trend, but given a deep enough
pockets and leverage, and
cooperation from like minded manipulators,
and they can make a good game of it for quite a long time.
As for the why the manipulation there
are many reasons. But as just one example, if I and a
group of associates could
push the bullion price around in the short term, I could make enough
money skinning speculators
in the ancillary markets,
derivatives like options
and in mining stocks for example,
to make it a very lucrative trade. This is Markets 201.
All that is required is that
the regulators turn a blind eye to the manipulation
in the markets. And if anyone
close to the markets still
doubts that they do that today, you will
excuse me if I don't take
them very seriously. The big trading desks have been using
the markets like their personal ATMs, and every time they get do get
caught in some slip up its a slap on the wrist and a nominal fine.
Has this fellow ever read anything
from Ted Butler or Harvey Organ?
Forget gold for a moment, what about silver? Is that market too big
Academics like Paul Krugman might not understand this, because this is not what they
do, and they tend to approach
the world through big picture models without the dark alleys and rough edges. But I would expect someone who considers
themselves a seasoned speculator and market savvy to know it.
The Wall Street demimonde does not care if the markets
are corrupt because if you get enough
information to see the 'bezzle
you can make money on the swings, or by serving
the interests of the trading
desks. But it can play hell with
investors peace of mind and is destructive of the
real economy because of malinvestment.
I don't like to dwell on the manipulation when investing as opposed to speculating. As I have repeatedly
said here, take your investment
positions based on logic
and the fundamentals and a long term
financial portfolio plan, and ignore the short term noise and wiggles. Thinking back I have always
made the most, if not all the profits on balance, when I took a solid position and then just rode it, sometimes for years. So if I were in the game of mining stocks I would not want to see people distracted from them IF they were in it for the long term and they were properly fit in a
Chris Powell makes a good show of answering these sorts of things, but I do not think that the effort here will be worthwhile.
Anyone who can trot out the canard that a 'market is
too big to be manipulated' does not engage my interest for very long. All will be revealed
in time whether we argue
about it or not.
But the real economy is
in dire need of serious
and meaningful financial reform, which includes cleaning up the markets and taking the pampered princes off the malinvestment
feedbag. And that is something that matters greatly.
"In an essay posted
Thursday, financial writer
Doug Casey of Casey Research asks
for evidence of gold market
manipulation and some explanation
of its purpose. Casey's essay is headlined "Precious Metals Market Manipulation?" and it's
The evidence and explanation
have long been posted in the
"Documentation" file at GATA's Internet site here.
Maybe the most comprehensive treatment of the subject is the latest version of your secretary/treasurer's "stump speech" here.
But we're always adding to the "Documentation" file, like the acknowledgment by the late Dutch central banker and Bank for International Settlements
President Jelle Zijlstra that Western central banks rig the gold market show here, so if he's at all curious
Casey might want to drop
by occasionally for updates."