The 300 Club

1000 Days of Average Gold Intraday Price Movement

The above chart from Nick Laird of ShareLynx and shown on Casey Research is remarkable. It shows how gold is sold consistently close to the London PM Fix. The majority of physical gold is bought on the London AM Fix. For more than 10 years the Gold Anti-Trust Action Committee (GATA) and a growing number of analysts have alleged manipulation and claim that sharp sell offs in the gold and silver futures markets are engineered.

They allege that this may be a way for the Plunge Protection Team or President's Working Group on Financial Markets to affect the “mood music” at the start of each day on Wall Street. The opening on Wall Street is eagerly watched by the global financial markets. GATA has some evidence (including admissions by officials and sworn testimony) and their allegations have yet to be examined or rebuffed by those who they accuse, by the media or many analysts.

Besides the mood music and maintaining confidence in US markets and the US dollar – another motivation may be the number one motivation of many Wall Street players – to make money or the profit motive. Large institutions with close ties to the US government, Treasury and Federal Reserve may have access to information not available to other market players which they can press to their financial advantage.

Given some of Wall Street’s far from ethical behavior in recent years it is incumbent on us all to keep an open mind on such matters rather than resorting to name calling or dismissing without investigation as “conspiracy theory”. Indeed, after many years of investigating this matter, the CFTC itself has not come to a conclusion.

A paper-driven sell off in the futures market (whether natural or manipulated) will likely be greeted lustily by physical buyers who continue to buy on all dips.

Concerns about wholesale liquidation of the gold ETF (see chart above) is overdone despite it being the latest “reason” the bears are putting forward for a fall in gold prices. Indeed George Soros himself seemed to have hinted at this – in the usual cryptic way he speaks about the gold market.

This latest bear’s argument is again very weak as much of the buyers of the gold ETF are passive in nature and not the leveraged short term players on futures markets. Many, including hedge funds such as David Einhorn’s Greenlight Capital, are value-oriented funds and have bought to hedge the “fiscal pathology” in the US today. This was warned by Federal Reserve Bank of Dallas President Fisher overnight.