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Does the CPM Group's analysis indicate that the gold market is manipulated?

January 6, 2016
Video Transcript

There are people who have been focusing on large moves in gold prices and silver prices. They say, "This is a sign of manipulation and that some large entity is pushing the price down or wants to suppress these prices." If you look at the data historically, and a lot of people have, including: the CFDC, the Bank of England, the FSA, and the CPM Group, and others, you don't necessarily see that. In fact, there's a lot of evidence that suggests that it isn't going on. What we did is we looked at October, because October 2013 started with a large downward move in gold price in a 10-minute period. A lot of people said this was a "Smack down" that the gold price was being hammered down by some international group that wanted to suppress the gold price. Now the Logic and reasons for it are spurious to begin with, but let's just deal with the stats.

What we did, is we looked at October gold trading on the Comex and we found seven 10-minute periods over the course of October that were abnormally high volumes of gold. By that we mean, more than a million ounces of gold trading on the Comex in a 10-minute period. There were 7 of them in October. Four of them were buying events. The price of gold actually spiked higher, during those periods of time. Three of them were selling events.

So your first conclusion is that this is not an effort to drive the gold price down. This is an effort to take advantage of a very thin gold market that can move sharply higher or lower on a technical basis, just based on the price movements. You trigger a stop on a buy side or a sell side and you can see a higher or lower price. So 4 of the 7 events in gold, in October, were buy side. Now there's data that hasn't been made public yet, but you can look at it and you can see that in each of those 7 events there were more than 100 entities trading, buying or selling depending on which way the market was going. So what you're looking at is not a single entity doing a large number of trades. What you're looking at is a large number of entities trading based on computer models or, in many cases nowadays, having computers trade for them automatically. They're all the same computers, they're all the same programs, they're all the same price data, and they all have the same buy and sell points. What you find is that these buy and sell points are triggered and you have this massive amount of orders--to buy or sell--come into the market. It's high frequency trading.

Then you take a step back from the gold market, because again gold people tend to look at the world in gold colored glasses or are eccentric and you look at the commodities market and you see the same kind of clusters of large volumes. In fact, it's much more problematic in the grain markets, than it is in gold and silver. So you're looking at not somebody trying to manipulate the gold and silver market, you're looking at something that goes across commodities. Then you go another step back and look at bond markets, and currency markets, and stock markets and you see the same trading pattern. What we're looking at is the effects of high frequency trading and computerized trading. It's across financial markets. It's a problem for the entire financial system. It's not an issue of one entity coming in and trying to slam the market.

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