Friday, December 16, 2011

More Proof That The Gold Sell-Off Was Manipulated

This will be a quickie today.  Kudos to the commenter who alerted me that the OCC - Office of the Comptroller of the Currency - released its quarterly report on bank trading and derivative activity for the 3rd quarter of 2011 today.  Here's the LINK  Please note that the "precious metals" category is primarily silver derivatives.  So the report is largely about gold and silver. There is very little if any trading in platinum and palladium OTC derivatives.

It has been documented by over time that a large increase in the amount of gold and precious metals derivatives outstanding for the 5 largest banks is highly correlated with a big price "correction" in gold and silver.   Interestingly, JP Morgan and HSBC are considered to be the primary metals market manipulator in this country  Even more interesting, you can see from the latest OCC report that over 99.6% of the precious metals OTC derivatives positions held by all banks is attributable to JP Morgan and HSBC.  Hmmm...

Looking at the quarter-end end outstanding amount from Q2 to Q3 this year, you'll see that the JP Morgan's gold and precious metals OTC derivatives positions increased from Q2 to Q3 by 15.2%.  Even more interesting, JPM's gold derivatives position with a maturity of less than 1 year increased by 28.5%.  HSBC's derivatives position in gold and precious metals increased by 24.8%.   It's needless to say - but I'll say it anyway - JPM and HSBC made millions for their proprietary trading positions on their derivatives postions in gold and silver in the last two weeks.

Please note that the OTC derivatives market, thanks to Robert Rubin, Bill Clinton, Alan Greenspan and the current Treasury Secretary Tim Geithner is largely unregulated and unsupervised and is riddled with a high degree of illegal activity.

There's not much more to say about this other than the fact that this high correlation between large increases in the derivatives positions in gold and silver derivatives by JPM and HSBC and the extreme downward price movements in gold and silver has persisted for a long time.  Anyone who looks at this data and does not admit that the big market corrections we experience in gold and silver are the product of illegal manipulation is an idiot. 

Eventually the sheer force of demand in the physical gold and silver markets will prevent JPM and HSBC from manipulating the market using paper securities.  That's when the real fun begins for those us of who truly understand what is going on and own a lot of gold and silver.  When this does happen, GLD and SLV won't be of help as they will perish in fraud.  Having traded and lived through several other manipulated market sell-offs like this over the last 11 years, I can say with conviction that the counter-move to this manipulated sell-off will be new highs in both gold and silver within 12 months. Have a good weekend.  Go Broncos...


  1. How big is the paper silver/gold market compared to MFGlobal? Will people with paper get paid in cash or get stiffed and get nothing? --
    LCS Buyer

  2. A final and total catastrophe in the making...

    Egon von Greyerz (EvG):

  3. I wouldn't be suprised if JP Morgan and HSBC are being given free reign to do what they do by the government with the excuse being that it is for National Security reasons. Just like the telecomms, they won't be held accountable.
    Also, these unregulated derivatives would seem to be the perfect way to launder drug money around the world.

  4. More proof that we're screwed...don't swear..things are changing everyday

    Pennsylvania police officer filmed firing taser at teenage girl - video

    CCTV footage shows a police officer pushing a 14-year-old girl against a parked car and firing a taser at her groin. Shortly before the taser was fired the teenager is seen raising her hands in surrender. She received hospital treatment after the incident in Allentown, Pennsylvania

  5. @Mike..I think you're right and I think they launder more things in more ways than we'll ever know...kind of like your favorite politicians book sales being bought via shell company's as a soft "under the table" payment system...?????think about it...nothing has changed...just the delivery mechanism.

    Former Texas Judge Charged With Taking Bribes in $40 Million Refinancing

  6. Comment of note from tfmetals:

    This will be the biggest financial storm in the history of mankind.  But the people who matter, you know, the people who think we don't matter, own stock too.  Therefore, you can bet there will be a market and a financial system when the collapse comes.  A substantial revaluation of gold and devaluation of fiat, combined with a huge amount of defaults/debt forgiveness will be in the cards, but your stock won't go to zero.  Rich and powerful people need stock markets, so they will survive, including miners.  

    Miners:  They are going to continue to suck wind until the current system collapses, because there is nothing to stop TPTB from naked shorting them.  Sorry, you aren't going to make any money until the system collapses.  Will they be confiscated at that time?  I seriously doubt it.  Very powerful people are likely to suck up as many shares as they can before the collapse, like yours if you bolt from the bushes because of paper losses under latter stage fiat.  We have stalled the collapse for three years, so you know the central banks have got a lot of gold in their vaults.  If they succeed in getting enough, they won't need the gold in your miners.  If they don't have enough gold and have to make their move early because of instability in the system, there are a lot of other pools of ready gold to confiscate (ala MFG, or GLD, which I think will switch to actually stocking real gold at the end in anticipation of the collapse), so why nationalize the miners?  This of course assumes your miners are not in countries that are caught with no gold in their central banks, those are at risk.

    IMO, miners are the best late stage play because they have been the most susceptible to manipulation (a bargain) and are likely to be  ruthlessly driven down the most just before the collapse (prior to the ramp in prices).  I have stayed away from miners because of these opinions, and by luck, that has saved me a lot of mental anguish.  When the punishment of the miners is over, they will be one of the best opportunities in the market.  The gold bugs were right, the manipulation proves that, they were just early.   It's your money, but I would hold tight and shut off the TV.

    My own question: is the above a valid possibility? Ie., can this manipulation of the metals and the miners continue indefinitely until the collapse?

  7. Can you explain how the derivatives held by these firms affect the gold and silver price? Thanks.

  8. (Dave)

    re derivatives. OTC derivatives are used the same way as paper futures on the Comex of LBMA (forwards). A futures contract is a derivative, but at least it is confined to a slightly regulated environment with visible rules and protocol. An OTC derivatives is an off-balance-sheet instrument with no regulation and in fact can be an even more effective tool for manipulating the market. We don't know the terms and conditions of these OTC derivative/structured note contracts so they can actually be an even more insidious way to control the market.

    Furthermore, when the CFTC goes to JPM and says hey man we need to see what you are hedging with your huge short futures position, all JPM has to so is say "see my OTC precious metals position? That's what I'm hedging." The discovery never goes beyond that. At least a Comex futures contract has attached to it the right to take delivery of actual physical. The metal referenced by the massive OTC derivatives contracts is likely nothging more than hypothetical.

  9. After reading this how do you deny the concept of confiscation....the real terrorist wield pens in an inescapable construct, that is, unless you hold your own physical.

    Trustee to Seize and Liquidate the Customer Gold and Silver Bullion From MF Global

    The bottom line is that it seems that some warehouses are not a safe place to store your gold and silver bullion, even if you have a warehouse receipt for a bar of silver and gold.

    Through fraud, you hold counter-party risk if you hold that gold and silver through another party, even if they are a Primary Dealer.

    If a Bankruptcy Trustee can pool your bullion into the rest of the paper assets and liquidate it, you will have to accept whatever paper settlement that they give you.

    For many this would have been 'unthinkable' only a few months ago. They had been warned, but chose to trust the financial system. And now they are suffering loss and anxiety, and the misappropriation of their wealth.

    Get used to such revelations as the system continues to unwind and new and greater frauds come tumbling down.

  10. Proof? PROOF?

    Deja Vu here.

    How many ways can one skin a cat? (Poor kitty, kitty)

    How many times does one need to hear "get out of ALL paper" before one gets out of ALL paper? (Got the essentials for survival?)

    What are the mental mechanics required to take place for one to "get it"? i.e. when one realizes the depth and magnitude of the high intensity, catastrophic Fire, raging towards ones abode; when one finally knows it's time to "do something", like GET THE FUCK OUT?

    What will it take to wake one up from denial? Is it possible? What is that defining moment, just prior and just after?

    What will it take to convince one that "they" manipulate ALL systems in the world? Their mind control methods (on the inhabitants of the human form) have been systematically refined over the ages so that little or no awareness of anything other than what humans are told to believe, computes in the empty mush craniums of the human masses.

    The system is rigged, on ALL levels. (Hello? Anybody in there?)

    Any possible way to circumvent the Program? To deprogram the program? Reprogram what's left?

    Consciousness, the field of all possibilities. Become Established in the Self.

    It will be the only SAFE place to reside once the real action begins.

    Otherwise, expect the gnashing of teeth during sleeping hours; 24/7.
    Got a TMJ device? A good dentist?

    1 out of 5 Americans is on anti depressants. that's 20% of the people you come into contact today. Almost 50% of population are on some form of Rx drugs. Then there's the non-Rx drugs crowd (My, oh my).

    This "phase transition" is going to be historically unprecedented, unparalleled, unfathomable, unbelievable.

    Got Consciousness, i.e. Awareness of the Self?

  11. Joe Rogan explains the military industrial complex and Ron Pauls candidacy.

  12. December 17, 2011
    CA Pension Funds

    The June funded ratio, which measures assets to liabilities. is only 74% for CalPERS even using a high-rate of return assumption for its investments. Assume a 6.2% return, and the funded ratio drops to 58%. On the same basis, the funded status is 60% for CalSTRS and 72% for UCRP. (These ratios are unsustainable, it will go much lower.)
    The report notes that private plans with a funded status below 80% “are required to freeze benefits and face other restrictions.” (And this is why you will never see the full amount of your pension money, whether public or private.)

    The total unfunded liability for all three systems is close to $300 billion at a 6.2% rate of return; assume a 7.75% return and the shortfall is still $142.6 billion, “or nearly $12,000 per California household.”

    Using a low-risk discount rate, and the total unfunded liability balloons to $498 billion.

  13. Richard Russell - I Will Stay with Gold & Gold Stocks to the End

    Richard Russell continues:

    “Nobody in America under the age of 70 has ever seen truly hard times. Most under 70 have never even heard stories from their parents about hard times (their parents had never experienced hard times). Ever since World War II Americans have sipped at a punch bowl that was a mixture of borrowing, greed, impatience, debt and inflation. I believe we are now on the path to once again see really hard times, times that force us to think about our current dire situation.

    For years America was the shining beacon that allowed the world to see what freedom and free speech and wealth and democracy were all about. America was the dream-land, the ideal. In the years since WWII, that has changed. America is now seen as the meddling, fat, money hungry, war-loving immoral land where you can do what ever you want, and if you have a good lawyer you can get away with it.

    I see my pen-pal Dennis Gartman, has turned bearish on gold and has sold all his holdings (he's quoted every where). Sorry, Dennis, I disagree with you. Gold is NOT in a bear market.”

  14. We can send the warning but that doesn’t mean anyone will listen or heed our words.

    In the 1960’s silver was going up in price in spite of everything the governments of the world tried to do to stop it. Governments, including the US Government and its lackeys (wall street ‘experts’) tried to convince the public that exchanging US Dollar bills for silver coins was foolish, unpatriotic, harmful to the economy by depriving business of small change, and many other such claims. The majority accepted the argument from the government, the economists and wall street experts and didn’t try to exchange their paper for silver coins, much to their later regret when first silver coins were replaced by clad coins (losing out on the chance to exchange bad money for good) and then when silver took off in the 1970’s allowing the minority who ignored the ‘know it alls’ and made handsome profits while the majority suffered under rising inflation with limited means to preserve their wealth.

    Consider the housing boom and all of the followers who claimed “this time is different”, the dot coms and their boosters of the 90’s, the shoe shine boy stock pickers of the late 1920’s. (Most likely there were a those on the Titanic who refused to try to man the lifeboats-until it was too late!)
    Trying to warn any of them of the possibility of loss was like talking to a brick wall, trying to warn people of the coming inflation and increase in the price of gold and silver is like talking to a brick wall. Maybe, Maybe a few will listen, but sadly the majority don’t or won’t.

    You can lead a horse to water but you can’t make him drink, you can lead a fool to a library but you can’t make him think. You can’t save a fool from his own destruction no matter how hard you try, they either change their ways or suffer the consequences, there is no third choice.

  15. Saturday, December 17, 2011
    #Occupy the SEC Nixes Repo Exclusions in the Volcker Rule

    The draft of the Volcker Rule, which grew from a three-page proposal to a 300+ page behemoth, was released by the regulatory agencies this October. The draft rule grants a number of exemptions from the proprietary trading restrictions. One of our major concerns is the blanket exemption for repurchase agreements (“repos”). The exemption isn’t mentioned in the statute, and for reasons discussed below it seems to defy the intent of the rule. In our eyes, the presence of such an overbroad exemption is profoundly disappointing. Whose interests are the regulators serving?

    The fall 2008 ‘liquidity’ crisis was largely the result of a breakdown in the repo market. Yet the draft rule sees fit to license any and all repo trades in the name of innocuous ‘securitized lending’. These trades are hardly innocuous. Repos are intimately involved with prop trading books, overleveraging, and regulatory evasion, and are exactly the kind of mischievous and systemically risky transactions the Volcker Rule was meant to restrict. Starving the beast, rather than keeping it well-fed with regulatory exemptions, was the intent. That intent is damaged, if not entirely compromised, by the proposed exemption.

    We would hope that regulators might have learned their lesson about assuming that all repo was plain-vanilla repo. Since there is no standard contract for repos like with ISDA, dealers are free to be extremely creative in their contracts. This potential has been abused, notably, with the Lehman Repo 105 and the MF Global reverse-repo account ploy.

    That said, in the same Reuters article it is noted that Merrill Lynch has “disclosed that they use the [repo-to-maturity] structure.” We feel it is very likely that other US banks have repo trades of this type on their books, making this transaction and the concerns it raises a potentially significant issue in both the Volcker Rule’s implementation and our future systemic stability.

  16. Ron Paul & Joe Rogan on the Tonight Show w/ Jay Leno!

  17. Accelerating money supply and hyperbolic gold
    December 18th, 2011 by Egon von Greyerz

    My good friend, the extremely bright and perceptive Alasdair Macleod has posted a superb piece on the True US Money Supply Growth and the effect this will have on the Gold price. Alasdair shows an extremely interesting Gold projection chart. It demonstrates how Gold will become hyperbolic in the next few years with the vertical rise starting in 2014.

    This is very much in line with my forecast of unlimited money printing and hyperinflation.

    This article is a must read.

  18. More proof we're collectively screwed...

    9 Things to Say Goodbye To, Including Privacy and Free Speech

    My site, ZeroHedge, Calculated Risk can all be shut down if a newspaper
    or other cite thinks we went beyond fair use in quoting an article. Drug
    imports from Canada (something that ought to be legal), will be shut
    down as well.

    This bill's real intent is not to stop piracy, but rather to hand over control of the internet to corporations.

  19. Martin A. Armstrong-write your brokers

    Martin A. Armstrong,_Buffetts_Silver_Play.html

  20. Public Policy Polling has Ron Paul in First Place in Iowa

    Enjoy this paper....fine read.

  21. Did GLD And Other Gold ETFs Kill Gold Stocks?

    In a just released piece by Goldman's Eugene King which explains the firm's justification for why gold will peak at over $1900 in 2012, and which we will discuss in greater detail shortly, Goldman brings up a very interesting point, namely that the ongoing weakness in gold stocks, and the broad decoupling of gold miners from gold price can be attributed to one primary thing: the emergence of synthetic means of expressing a position on the gold market and "bypassing" direct gold cost pass thru exposure in the form of gold stocks. Supposedly this is a good thing, although we would caution that this is potentially a very insidious scheme to allow the world's cash-rish entities (read banks full of those ones and zeros that these days pass for "money") to procure real gold assets at very cheap prices and valuations, even as the broader retail investors proceeds to chase paper gold in the form of "synthetic CDOs" such as GLD (which as we first noted over a week ago may well disappear when the paper claims collapse and suddenly everyone has a claim on the underlying physical), only after the fact realizing they merely used gold as a paper pass thru equivalent. In other words, as the broader population continues to realize that gold is the real safe asset, yet invests in legacy forms of exposure, i.e., paper, the real hard assets: firms that actually extract gold from the ground and process it, remain out on the auction block to be snapped up quietly by all those who want exposure to the primary source of the metal, which they can then throttle at will in order to manipulate the supply side of the equation post facto.

    So while we appreciate the fundamental and technical reasons for why gold stocks are underperforming, the sinking feeling we have is that as synthetic exposure in the form of CDOs has surged in the past decade, allowing more and more retail investors to foolishly believe they are invested in "actual gold" (and not paper claims thereof), this has acted as a grand distraction preventing those who want real exposure in the form of controlling the underlying asset from expressing their interest in the right way. Because all it would take is for banks with a glut of credit money to bid up all the gold miners, and thus control the entire physical gold supply chain, at which point the "distraction" of precious metal ETFs can simply go away.

    Our advice, as always, stay away from ETFs: they are nothing short of what synthetic CDOs were back during the credit bubble years. And take advantage of relative mispricing between fake (ETF) and real (miner) asset representation.

  22. Jon Corzine, MF Global, and Unaccountability

    After days of political-reality TV, we knew nothing more about its evaporation. Corzine and his stewards, Abelow and Chief Financial Officer, Henri Steenkamp, executed a perfect chorus of ‘I don’t recalls’, ‘I didn’t intends’ and ‘the butler did its’.

    For the most part, testimony from the various regulators didn’t shed additional light on the ‘missing’ funds either (everyone’s extremely sorry and deep in search mode) but they did reveal extreme, pass-the-blame incompetence, in the spirit of AIG.

    Really, how many inept regulatory bodies does it take to screw customers out of $1.2 billion?

    Let me put $1.2 billion into a perspective that the House committees didn’t. According to its second quarter SEC filing, MF Global had $3.7 billion of available liquidity. The funds were equivalent to a third of that liquidity. That’s not a tiny figure. If you’re running a firm buckling under the weight of the bets you’re losing, you’re damn well aware of your liquidity lines – they are your life raft.

    Besides that, MF Global’s net revenue for the second quarter was $206 million and for the six months ending September 30, 2011, it was $520 million. The ‘missing’ customer money was more than twice the firm’s net for the first half of their year.

    To recap. Corzine was obsessed with the European sovereign bet. So, he fired his risk officer, Michael Roseman for questioning it, and replaced him with a yes-man, Michael Stockman whose job description appeared to have included stroking Corzine's – er – ego, and to remain quiet about any trade concerns. He rides the trade through a succession of flailing earnings and intense market volatility, while meeting with regulators questioning its sustainability. He knows he’s got to pony up a chunk of capital in the summer to appease them and stick with it. And when finally, MF Global’s ratings were downgraded on October 25th, a bunch of calls transpire between him and NY Fed head and former Goldmanite, William Dudley before the firm goes bankrupt a week later, with nearly $1.2 billion in customer money ‘missing.’

    We’re supposed to believe this ‘thorough and exacting’ man knew nothing about where it went? Or that his sense of entitlement and bravado was so big, he didn’t think it was wrong to take that money? Or that he wasn’t aware it was available? At all?

    No. Not possible. And yet, over half a dozen regulatory bodies were oblivious to the fund heist. Finding Corzine guilty of a crime would be like asking them to indict themselves. The CFTC Enforcement division can refer criminal matters to the Department of Justice for prosecution. But the DOJ has punted on every Wall Street crime related to the 2008 subprime crisis. So what will probably happen – is that Corzine may get a little fine from the Washington regulators. Legislators will move on to figuring out how to incorporate MF Global into stump speeches. Those that had their money stolen will battle it out in civil suits for years. And again, no lessons will be learned. No practices altered. No heads will roll.

  23. Ron Paul & Joe Rogan on the Tonight Show w/ Jay Leno