Something very interesting happened Friday morning, February 5, 2016. Interesting for most of us. But really interesting if you are trying to understand gold prices so you can make the right (profitable) investment decisions. What happened underscored the fact that, recently, the entire universe of gold writers and commentators has broken into two distinct camps—those who accept gold price manipulation and those who won’t touch that topic with a 10-foot pole.
At exactly the same time that Friday’s bizarre employment report was released (a report with a sordid history of multiple, retroactive adjustments) “someone” dumped paper gold contracts onto the Comex worth about $1.2 billion.
That is what Zerohedge reported and it is fully consistent with a pattern I have been watching not for days, not for weeks, but literally for years. (Source: “Gold Surges Back Into The Green After $1.2 Billion Morning Plunge,” Zerohedge, February 5, 2016.)
Why is this interesting? Because, if you think about it, there are very few players with the credit, capital, or resources to make that specific trade with such laser precision. Your friend Jimmy, who likes to trade commodities in the elevator using his “iPhone,” would be an unlikely candidate. In most cases, even most senior traders from the most prestigious houses would be unlikely candidates! The trade was simply too large and too unwieldy.
Also unusual about that single trade is that it was not fed into the market gradually—which is the way an ordinary seller would “manage” a large sell order, to get the best price—but dumped holus-bolus onto the bid stack. Which promptly smashed the spot price $20.00. This, in turn, suggests that the mystery seller wanted to smash the price by the sheer force and power of the order, so he could cover later at a lower price and pocket a nice chunk of change…?
(If true, this adds yet another forensic characteristic to our mystery seller—pretend we are on CSI here—in that, whoever it may have been, he had no fear whatsoever of any investigation or consequences related to market manipulation. Marker manipulation that, as I have explained before, is illegal for 99.99% of the trading public, but is specifically allowed for government-related entities.)
Zerohedge even went so far as to suggest that the seller was coordinating his timing with the employment report, as if someone wanted to “paint the tape” to show how wonderful the U.S. economy was, and how totally wretched the gold market was. (Source: Ibid.)
Gold Price Analysts Have Now Gone Full-Tilt-Schizoid
I told you about that specific Friday morning trade (actually one of dozens of similar trades I have clocked since mid-2013), because I am very worried that readers who follow the various gold commentators are completely unaware of the “bifurcation” that has recently taken place in that field.
It is simple: right at this moment, it is now possible to classify every gold commentator and reporter on the planet as belonging to one of two camps: those who believe gold has been actively manipulated by government agents from 2011 to the present and those who believe the gold numbers (hence, the gold charts themselves) are pristine, correct, accurate, and reflect true demand and supply.
Why This Is Important…
I have talked about this before and it is a good bet that I will revisit this topic in the future. The reason you need to understand this is that commentators of the latter school—those trusting that the numbers we have been seeing for years are genuine—may, in fact, be basing their research and their analysis on highly compromised data. If this is correct, they will likely be the last ones to spot a true “turn” in the market, not the first.
On the other hand, those writers and researchers of the former camp—those who accept government intervention in the PM sector as a fact of life, like bad weather and chicken pox—will constantly be looking for other, non-traditional, indicators to spot the turn.
An example? Well, as recently as a year ago, a $20.00 gold smash of the type described above would have effectively quelled the gold market for at least a few days, possibly a week or more. In this case, however, as Zerohedge reported, the spot price bounced back in minutes like it was on a trampoline.
That single fact would be meaningless to those in the “no manipulation” group, but very telling to those in the second category.
And something an informed and inquisitive investor really should notice.