We Always Knew the Gold Market was Rigged

[TheFalls]

...along with the silver mkt as well.

I bought in to the hype Dawoofdaddy, etc were preaching here back in '06-'07 and started buying physical gold at around $550 and physical silver at around $12.
It was the middle of this micro bull run within the current macro bull run.
No telling where all the pm's should really be at this point.
I can only imagine what is going on over at the Kitco forums. I bet it's a freak fest...





http://www.zerohedge.com/news/2014-...-price-gold-decade-sending-bursts-sell-orders

It was almost inevitable: a week after we wrote "From Rothschild To Koch Industries: Meet The People Who "Fix" The Price Of Gold" and days after "Barclays' Head Of Gold Trading, And Gold "Fixer", Is Leaving The Bank", earlier today the UK Financial Conduct Authority finally formalized what most in the "tin-foil" hat community had known for years, when it announced that it fined Barclays £26 million for manipulating "the setting of the price of gold in order to avoid paying out on a client order." Furthermore, the FCA confirmed that those inexplicable gold raids which come as if out of nowhere, and slam gold with a vicious force so strong sometime they halt the entire market, had a very specific source: Barclays, whose trader Daniel James Plunkett, born 1976, "sent out a burst of orders aimed at moving the price of the yellow metal."

This took place for a decade. As the FT reports:


The FCA said Barclays had failed to “adequately manage conflicts of interest between itself and its customers as well as systems and controls failings, in relation to the gold fixing” between 2004 and 2013.

Some further details on Plunkett's preferred means of manipulating the gold price.


The FCA said Mr Plunkett had manipulated the market by placing, withdrawing and re-placing a large sell order for between 40,000 oz and 60,000 oz of gold bars.



He did this in an attempt to pull off a “mini puke”, which the FCA took to mean a sharp fall in the price of gold. As a result, the bank was not obliged to make a $3.9m payment to the customer under an option contract.

Which is precisely what we have shown many times here for example in "Vicious Gold Slamdown Breaks Gold Market For 20 Seconds", when a sell order so aggressive comes in it not only takes out the entire bid stack with an intent not for "best execution" but solely to reprice the market lower. Recall from September:


There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as "banging the close." It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night's slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!



To summarize: a humble block of 2000 gold futs (GC) taking out the bid stack, and slamming the price of gold, managed to halt the gold market: one of the largest "asset" markets in the world in terms of total notional, for 20 seconds.

 

[SECplayer]

Wow. Very interesting.

Originally reading the article, I was a little surprised that an entity as prominent as Barclays would risk such just to avoid one $3.9 M payment (pennies for Barclays) but I'm guessing they've been doing this for a long time and over the course of many transactions over many years, I can see how that would add up to a very sizable chunk.

Hopefully that option holder will ultimately gets what he is rightfully owed and hopefully a heckuva lot more after he shows what amounts to absolute fraud. And hopefully criminal charges are also pursued against the trader.

Should be be huge sanctions for Barclays.

I hate reading shit like this because it makes you realize how little control you actually have on your investments and that to some extent you are completely reliant upon outside forces and have no idea whether those outside forces are manipulating the market or not.

 

[niltes]

gold (like some other commodities) was always thought to settle around key numbers at option expiration
time. if that's the case one could certainly see that that result was many standard deviations from random or normal
expectations. a lot of gold traders would NEVER let any option that was in the money stay active very close
to option expiration due to the potential of fluctuations that could severely affect one's bottom line. most large
option positions held by professional traders are either closed well before the final setting or rolled into future months
unless that option position was required as a hedge against another gold or gold option position.

 

[Illini]

Good for us. Buy, buy, and keep buying while you can.

 

[Blotto]

Good for us. Buy, buy, and keep buying while you can.

Seems to be a fool's errand at this point... Bought a lot in '08, and certainly haven't lost anything, but the last couple of years have been disconcerting... There's little doubt the metals will pop again, but when? If it's a decade from now, might wanna mark it down as a poor investment...

 

[ivyconniver]

surprised that an entity as prominent as Barclays would risk such just to avoid one $3.9 M payment (pennies for Barclays)

This isn't something Barclays did, it's something one bad trader did on his own, in order to protect his own P/L book. It was incredibly obvious, and he was caught, and the client was paid. The reason he did it is because he is paid directly off his P/L for the year. This type of loss could cost him hundreds of thousands of dollars at year end, and potentially get him fired. He took a bet 2 years ago when he didn't hedge out the position, and it burned him. That happens to traders all the time. He only ruined his career when he tried to cover it up.

Despite what some wackjobs may say, the banks are not evil entities out to rob main street. In fact, this did nothing to the long term price of gold. There are some bad individuals, but regulation and oversight is being heightened to insane levels these days, and they are getting detected and dealt with much more effectively.

All that said, I wouldn't touch gold with a 10 foot pole right now. When interest rates rise, it will become a large opportunity cost to hold it, and many institutions will sell, or at least not buy. Do yourself a favor and buy some SPY and lock it away. Spend or reinvest the dividends, let the capital take a 5+ year view, and you'll be A-OK.

 

[SECplayer]

This isn't something Barclays did, it's something one bad trader did on his own, in order to protect his own P/L book. It was incredibly obvious, and he was caught, and the client was paid. The reason he did it is because he is paid directly off his P/L for the year. This type of loss could cost him hundreds of thousands of dollars at year end, and potentially get him fired. He took a bet 2 years ago when he didn't hedge out the position, and it burned him. That happens to traders all the time. He only ruined his career when he tried to cover it up.

Despite what some wackjobs may say, the banks are not evil entities out to rob main street. In fact, this did nothing to the long term price of gold. There are some bad individuals, but regulation and oversight is being heightened to insane levels these days, and they are getting detected and dealt with much more effectively.

All that said, I wouldn't touch gold with a 10 foot pole right now. When interest rates rise, it will become a large opportunity cost to hold it, and many institutions will sell, or at least not buy. Do yourself a favor and buy some SPY and lock it away. Spend or reinvest the dividends, let the capital take a 5+ year view, and you'll be A-OK.

Gotcha. That's a little more understandable.

 

[shane-o-mac]

Seems to be a fool's errand at this point... Bought a lot in '08, and certainly haven't lost anything, but the last couple of years have been disconcerting... There's little doubt the metals will pop again, but when? If it's a decade from now, might wanna mark it down as a poor investment...

gold up 7% YTD. better than stocks.

 

[EVincent]

somewhere Bob Chapman is smiling.

 

[niltes]

barclays paid the owner of the option $3.9 which is what he would of made without
the manipulation. evidently he called the next morning pretty irate and asked
for an explanation as to the late price movements. i suspect when barclays
internal investigation uncovered the facts they paid him hoping the matter
never went public.