Manipulation of the silver and gold “fix” is only the tip of the iceberg regarding the manipulation of precious metals markets.
Of far greater significance are the following categories of fraud and manipulation:
Submitted by Jeff Nielson, Sprott:
There has been considerable hoopla and celebration, following Deutsche Bank’s legal settlement , in a U.S.-based litigation against this Big Bank regarding precious metals manipulation. The enthusiasm surrounds Deutsche Bank’s pledge to “cooperate” in providing evidence to be used against the other defendants in that litigation: HSBC and the Bank of Nova Scotia (and possibly UBS, as well).
It is painful to be a naysayer here. The extreme, perennial, manipulation and suppression of precious metals prices is one of the more odious blotches on what we call “markets”. However, there is unfortunately no basis for renewed optimism that this current litigation will have any meaningful impact on precious metals manipulation – with respect to either silver or gold.
There are several reasons for not considering this to be the turning point in precious metals markets which several commentators have suggested. The most important reason here is the subject matter of the manipulation itself. The lawsuit which reaped this settlement is based exclusively on manipulation of the silver fix (and gold fix).
As has been explained previously , manipulation of the silver and gold “fix” is only the tip of the iceberg regarding the manipulation of precious metals markets. Of far greater significance are the following categories of fraud and manipulation:
- Naked shorting
- Bullion “leasing”
- Algorithm manipulation
Naked shorting is an endemic form of fraud in our pseudo-markets, due to lack of regulation and enforcement of this crime. We can only assume that this is particularly egregious in precious metals trading, as the short positions in these metals is grossly disproportionate to shorting activity anywhere else in the spectrum of commodities.
So-called bullion leasing is a form of fraud and manipulation which has been discussed by many other commentators, as well as in previous commentaries . “Gold generates no income.” This tautology is true with respect to any commodity.
The only way to produce revenues from any commodity is to use it (i.e. consume it), or sell it. In either case, it requires surrendering possession. Consequently, there can be no legitimate business purpose in “leasing” any commodity, only nefarious ones. In the case of (central bank) bullion leasing, the fraudulent modus operandi is well known.
…central banks stand ready to lease gold in increasing quantities should the price rise.
– Testimony of [Federal Reserve] Chairman Alan Greenspan , July 24th, 1998
So what? Central banks “stand ready” to temporarily transfer possession of their gold to some third party. In what way does that counteract a rising gold price, the clear intent of Chairman Greenspan’s testimony? There is no legitimate way in which such a transaction could impact bullion markets.
The illegitimate way is well known. Western central banks “lease” their gold to “traders” (i.e. the Big Banks). The bankers then short the gold onto the market (manipulating the price lower), thus requiring them totransfer permanent ownership of that gold, should the party on the other end of the transaction take delivery of the metal being traded.
The gold is gone, forever, but it remains on the books of the central banks: the phantom “gold reserves” of which Western governments continue to boast. Countless, thousands of tonnes of gold have been leased onto the market during this era of manipulation. We don’t know the precise level of fraud with respect to central bank bullion “leasing”, because (of course) these institutes of financial crime permit no full, public audits of their books, ever.
Algorithm manipulation is undoubtedly now the most important category of precious metals manipulation, just as it is with respect to price manipulation throughout our markets. This has been well established inprevious commentaries .
So-called “HFT trading” (i.e. computerized algorithm trading) now dominates all trade activity, in all markets. The evidence of manipulation, particularly in U.S. markets, has now been clearly revealed and defined through research into this form of market crime. That research showed that:
- a) 75% of all U.S. equities were subjected to significant levels of algorithm price manipulation.
- b) This manipulation is not only endemic, it is systemic. This algorithm manipulation was strongly “correlated”, meaning it was being controlled by a single Invisible Hand – the Big Bank crime syndicate which regular readers know as the One Bank .
Throughout the last, five years of relentless price suppression, we have seen clear technical “break-outs” in the price of gold and silver, only to see prices quickly reverse.
It is true that even legitimate markets occasionally send false (technical) signals. However, both gold andsilver have been priced at only small fractions of any minimum, rational price which we could possibly assign. When strong, bullish technical indicators are accompanied by strongly bullish fundamentals,legitimate markets never reverse in such a manner.
This is why the mainstream media (a tentacle of the One Bank) invests so much time and effort with their own, gibberish analysis of gold and silver, creating their own, bogus “fundamentals” which they then hype as an “explanation” of the absurdly fraudulent prices of silver and gold.
Note additionally the pattern of silver trading over the past 5 years. Silver is both a much smaller market than the gold market, with much more volatile demand. For both of those reasons, the price of silver mustbe more volatile than the price of gold, yet over the past five years we see precisely the opposite pattern.
We see a pseudo-market which is being ruthlessly suppressed. Further indication of this comes by looking at the technical break-outs in the price of silver versus break-outs in the gold pseudo-market. Silver break-outs are instantly attacked, and the price is hammered lower, while gold break-outs occasionally are allowed to gather a little momentum, before then being illegally reversed. Indeed, it is precisely this previously demonstrated omnipotence which prompted the warning that the current “rally” in gold and silver is a fake-rally.
The fact that silver is held in a much tighter choke-hold reflects the differences in the fundamentals of these metals. Physical inventories and stockpiles of silver are undoubtedly much smaller than those of gold, in relative terms. The price of silver has been suppressed to a much more extreme degree. This means that the upward price-pressure on silver is much greater than with gold, and the capacity of the “market” to withstand any stampede of bullish demand is much more limited.
The Big Bank crime syndicate is much more afraid of silver than gold, and we see this clearly reflected in the pattern of price manipulation. The price of silver is never allowed to gain momentum, for fear that once “lift off” was achieved with silver that there would be no way to reverse either a price spiral, nor prevent some final, catastrophic implosion of inventories.
This brings us to the silver fix, and the Deutsche Bank settlement. The silver fix and gold fix were never anything more than minor tools of manipulation. At two moments each day; the banking crime syndicate “fixes” gold and silver prices. This is useful for defrauding contracts based upon the prevailing “fix” in gold or silver, but it has no significant impact on overall price manipulation.
Exposing such manipulation will do nothing toward preventing the continued, systemic manipulation of gold and silver prices, via the much more potent weapons of naked shorting, bullion leasing, and algorithm manipulation. Deutsche Bank was never accused of crimes of this nature in this lawsuit, thus its “cooperation” does not extend to providing information about such manipulation. However, by settling its own suit, acknowledging its liability, and “confessing” the manipulation of the gold-fix and silver-fix by other Tentacles, the One Bank can pretend that “manipulation” has now been eradicated from these markets.
This brings us to the final reason why the Deutsche Bank legal settlement is (unfortunately) much ado about nothing. It is the settlement of a lawsuit, not a conviction for the crime of illegally manipulating the gold and silver pseudo-markets. Deutsche Bank acknowledged civil liability for its actions, not criminal guilt.
These fix-manipulation lawsuits were launched in both the United States and Canada. Do we see the pseudo-regulators or pseudo-justice officials in either Canada or the U.S. announcing (criminal) investigations of the obvious crime for which Deutsche Bank has acknowledged its culpability? No.
Any real “investigation” might stumble upon the more potent forms of price manipulation discussed previously, and have some real, lasting impact on the serial manipulation of the prices of these metals. Civil lawsuits, no matter what their outcome, have no lasting impact on such systemic criminal activity. All that the victims of manipulation can do is launch additional suits in the future, since “justice” is a commodity which no longer exists in markets – the playground of the Big Bank crime syndicate.
As regular readers are already aware, the One Bank is now able to counterfeit its bogus “Monopoly money” in literally infinite amounts. No matter how much of its worthless confetti it is forced to shower upon litigants (now or in the future), such lawsuits could never have any deterrent effect on these financial crimes.
Even more appalling, when the Big Banks are actually caught-and-convicted perpetrating one of their serialMega Crimes , such convictions never provide any actual law enforcement. A token “fine” is paid, and then the Big Banks go right back to committing the same crimes . Indeed, the U.S. Department of (pseudo) Justice has now formally proclaimed that it will never punish these corporations for their corporate crimes.
In the face of such systemic, unobstructed criminality, the token “victory” in an aspect of precious metals price-manipulation which has little overall relevance is trivial. Real victories will only come with real justice. The latter no longer exists in our corrupt nations, thus we should not be holding our breath for the former.
|Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website iswww.bullionbullscanada.com.|