I saw a lot of charges of manipulation by shorts on Friday. Let’s look at the claims and today’s rebound.
Margin Call Theory
I could be margin calls but being stopped out of a position seems more likely.
A friend emailed me over the weekend congratulating the shorts on a manipulative smackdown.
If there was manipulation at all, it was manipulation higher not lower.
The market makers know where the stops are or go fishing for them. The action on Friday had little to do with overwhelming demand or shorts profiting.
After shorts were stopped out, at a loss, there was a vacuum of buyers and the price plunged back to roughly where the day started.
As I type, Gold is up $28 on the day topping $2,400. That would make another closing high.
Gold COT Positioning
COT stands for Commitment of Traders. Commodity traders are requited to post their positions to the Commodity Futures Trading Commission (CFTC).
The date by COTbase is incorrect. The reports come out on Friday, in this case on 2024-04-12 but reflect the positions held the prior Tuesday, in this case 2024-04-09.
The positions are as of April 9 not April 12.
I prefer the disaggregated charts because “commercials” includes both buyers and sellers. I cannot complain too loudly, I suppose, that chart is free. So let’s go look at the CFTC report for the week.
Gold Disaggregated Report
As you can see in the above chart, the data is as of April 9, not April 12 although it is reported on the 12th.
The CFTC explains: The Disaggregated COT report increases transparency from the legacy COT reports by separating traders into the following four categories of traders: Producer/Merchant/Processor/User; Swap Dealers; Managed Money; and Other Reportables. The legacy COT report separates reportable traders only into “commercial” and “non-commercial” categories.
Disaggregated COT reports started on September 4, 2009.
Commercials
The commercials consist of the producers (gold mining companies who are short, this is how they sell their gold), Merchants (those who create gold coins and jewelry) who are long, and swap dealers (market makers) who take the other side of trade.
For every long there is a short. Swap Dealers take the other side of trades netting things to zero. Lumping all of this together as commercials is not exactly revealing.
Managed Money and Other Reportables
Managed money is a specify type of speculator, often a hedge fund. Other reportables include individual traders and speculators.
Nonreoprtables
The “Nonreportable Positions” class is derived by subtracting total long and short “Reportable Positions” from the total open interest. Accordingly, for “Nonreportable Positions,” the number of traders involved and the commercial/non-commercial classification of each trader are unknown.
Is Concentration Proof of Manipulation?
That’s the charge I have heard repeatedly for years. However, the claim makes little sense and even if it did, what is the proposed remedy?
Tell producers to stop selling so much gold? Tell coin producers to stop buying so much gold? Limit the number of contracts so that managed money cannot buy more gold than producers are willing to produce? Demand more market makers so that short positions are not as concentrated?
In general market makers are hedged. That’s why all these reports over the years “the commercial will soon get blown out of the water” is so silly.
Commercials have been net short short all but a few months for decades. The commercials have never been blown out of the water and never will.
The broker dealers have admitted manipulation and been fined. But manipulation runs two ways. The market makers make money in both directions. Yet all we hear are complaints when the price of gold drops.
If there was market maker manipulation on Friday, it was higher, purposely running stops and killing the shorts. A vacuum then ensued, and prices tumbled.
The COT report for Tuesday, out Friday, may be revealing. But it’s also possible any long liquidation that happened Friday reversed today. This is the problem when dealing with time shots that have a multi-day lag.
Attempts to Take Gold Back Down?
Who precisely is attempting to take it back down?
“Friday saw Western traders push gold past $2,400 leading to algo buying & short-covering. Once the upward momentum faded, they sold gold off (hard). Normally, after a long gold run-up followed by a significant intraday reversal, we would expect to see a lengthy correction. Next week will be interesting to see if the Asian buyers, who have been the primary drivers of the gold market rally, change that dynamic. Gold futures open interest at 517K is not particularly high, so that is a limiting factor for any correction that might develop.”
It appears “they” want it higher and “they” want it lower.
On Friday, once the shorts covered, there was a price vacuum. Prices fell. There was no need for a “they” to push the price lower. It was automatic!
If there was manipulation at all on Friday, it was more likely higher than lower.
I do agree with Hickey that open interest is not particularly high. It will be interesting to see what, if anything, happens to managed money futures.
Gold vs Faith in Central Banks
Gold is best viewed as a hedge against declining faith in central banks.
Investors Shy Away From Gold?
I disagree with that take. People can only buy as much gold as American eagles are produced.
Instead, look at Costco
Millennials Rush to Buy $2,300 Gold Bars at Costco
Costco periodically offers one ounce gold bars. The bars sell out immediately, scarfed up by millennials.
On April 5, I noted Millennials Rush to Buy $2,300 Gold Bars at Costco
September 7, 2023: Debt to GDP Alarm Bells Ring, Neither Party Will Solve This
“Neither party will fix the deficits. Neither party will do anything about mounting debt. No one will do anything about anything because the political system is totally broken.” Mish
That’s the message of gold. Bitcoin advocates would say Bitcoin as well.
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The above link contains my affiliate code.
At Bullion Star, you can buy grams of gold and silver as well as ounces.
If you are interested in trading gold or energy futures, you might wish to give Phil Flynn, @EnergyPhilFlynn at the Pricegroup a call. That’s a courtesy link. I have no formal relationship, but I have known Phil for a long time.
Would You Like to Earn Interest, Paid in Gold, Not Fiat Currency?
For those interested in earning interest on gold, paid in gold, please see Would You Like to Earn Interest, Paid in Gold, Not Fiat Currency?
“As the authorities have set in place a system that bails out secured creditors with our bank deposits, stocks, and bonds, we will have no money and no financial assets to sell for money. People with mortgaged homes and businesses will lose them, as they did in the 1930’s, when they lost their money due to bank failures. People with car payments will lose their transportation. The way the system works is you lose your money but not your debts.”
link to paulcraigroberts.org
“Neither party will fix the deficits. Neither party will do anything about mounting debt.”
It’s a trap born of human nature. They know what the consequences are to them from doing something about it.
I have no idea why people think the FED is conducting a tight money policy. It’s not. Just look at large CDs, which are shifts in deposit classifications within the payment’s system. It’s the money school vs. the credit school.
Also, funds moving out of the O/N RRPs increase both the supply of new money and the supply of new reserves. Retail MMMFs are not money creating institutions. They are nonbanks. They do not reflect “money”.
You get a smack down when IRS payments are made.
“On Friday, once the shorts covered, there was a price vacuum. Prices fell.”
Chart gaps tend to get filled. As trader David frost likes to put it, “markets love to test breakout candle highs and lows.” Re-balancing.
“The paper shorts are being overwhelmed by demand for physical metal.”
When asked why the FED continued to hold gold, Bernanke said, “tradition.” It was disinformation. We are coming into the Great Reset, whether it is Klaus Schwab’s version, or something else. I was listening to former Wall Street analyst Ed Dowd yesterday, on USA Watchdog. He remarked that the CBDC is “slavery.” “A dozen Republican-led states plan to send a letter to Bank of America demanding an explanation for why it allegedly de-banked Christian and other conservative groups,” reported by Daily Mail. All that is needed is a crisis, to put the CBDC ball in motion. Never let a crisis go to waste, in order to gain more power. Controlling peoples access to what is supposed to be their own money, is an ultimate power.
Gold was as short term overbought as it has even been. It’s pretty normal to have big downs and ups when a security is this extended. But you won’t see it if you think it is manipulated or there is some other esoteric reason for the price action.
THIS. Yes, and perhaps it got so overbought because (a) shorts were covering and (b) it was making headlines so it attracted all the fast traders like flies on honey.
But then there was no one left to buy, on that day and at that price, so it flopped a bit.
Another interperation maybe the Iranian attack. People in the know got notice the attack was going to be limited and not lead to a wider war so they sold gold. Israel’s decision to strike back was unexpected so gold shot back up.
I wonder if this is impacting the jobs market?
US Civilian labor force disability survey from BLS. It’s a monthly phone survey much like the payroll survey. It’s basically real time and not tied to claims so no delays. No math needed here. Something changed in 2021 and caused an inflection in disabilities at a new rate of change period. It was sudden not gradual.
link to t.me
In case you are interested Total New Excess disability claims for all body systems in the UK were up 2.4% in 2019, 2.9% in 2020, 20.5% in 2021, 76.7% in 2022 and 69.1% in 2023. Do I need to even mention z-scores😂?
Must be massive fraud or something else🤔?
link to t.me
Excess New Neuropathy claims in UK are up 680% as of October 2023 starting to rise in 2021. A Z-score of 19. link to t.me
Covid vaccines
I was being urged by the team organizer roughly two years ago to Just Get the Shot!!!! so that I could play in a masters tournament.
My response was… there is no long term testing for side effects… they made this, tested it.. and launched it in less than a year so we have no idea what will happen to people down the road.
That shut him up (he ended up with a very serious case of sepsis … cuz the vaccines damage the immune system and that’s why we are seeing huge increases in cancer etc).
Well the medium term testing results are in as the great experiment involving 6 billion vaxxers continues… and they are grim.
I shudder to predict what is gonna happen going forward into the long term.
So no – I won’t be taking the Rat Juice Death Shots
interesting … up 40%ish. The timing is post-COVID and is aligned to the Biden Inauguration so maybe recent loosening of claim reviews? … or … VAX INJURIES! (aka long covid)
PS – nothing to do with gold but good stuff.
The entire notion of “manipulation” is nonsense.
Market makers exist to match trades. Of course they care where your orders are. Of course they know where your orders are. Of course they pull their bids and offers so the market can move to where more business can be conducted.
Of course there is no free money. You are not entitled to profit. You think your highly leveraged trading deserves to compete with all the actual investors who are going to safely buy and hold?
You should know this and you should have a completely defined strategy to be profitable regardless.
Stop complaining and take responsibility for where and when you decide to enter and exit.
I am not the one complaining – Rather it’s a complaint I hear every day
“I Was Wobbed”
It was my understanding there was a $1B+ sell order at the highs on Fri. Only a slammer would do that. No rational seller would unload a position like that. My take is that the physical is going into strong hands. So many yahoos have been using insane leverage on these derivatives. Then throw in increased margin calls the shorts have to sweat. Weak spec longs worry about increased margin calls, but not someone who is intending to take delivery. I imagine the risk officers are screaming at a lot of traders to close their positions. Which means more buying. This has the potential to get out of hand really quickly. Like, ‘to the moon, Alice!’.
Had a friend who was one of the traders at Bear Stearns. Before they imploded in the GFC. He said they had MANY way to manipulate stock share prices. Banks and others can do this too in commodity markets, particularly commercial bank traders.
Some is also the dynamics of positioning as mentioned.
But probably what took it down sharply after a very sharp move up was that people became aware that the Iranian response to Israel was being choreographed so the likelihood of general regional or world war was lost.
And then today Israels War Cabinet said they were planning a new response so the geopolitical risk is back on.
Also we are potentially headed into a short period of serious deflation, which is usually associated with gold ripping. Much depends on what the Dark Powers do in November
But a lot could also be BRICs countries buying in a relatively price insensitive way in the leadup to whatever currency and payments system announcements they will be making in August I believe in Kazakstan?
Wasn’t it Bernanke that said under oath that central banks only hold gold out of tradition? LOL!
On a more serious note, I steer clear of owning the miners now because of the endless share price dilution where the float often swells to ridiculous sizes even on mid-tier miners. It’s almost as big a scam as fiat currency itself.
Many central banks got rid of gold at rock bottom around the turn of the millennia.
Tells you the financial acumen of these guardians of monetary policy.
The question of “Acumen” depends on whose toast they’re really buttering, now doesn’t it?
Gold completed an Elliott wave that started in mid March.
Why is it that when the price of gold suddenly moves up or down it’s a conspiracy theory but when bonds, stocks, or other investments move up or down it’s just normal trading?
Good question…my 2 cents:
Gold is world-wide market with Russia/China highly involved. It’s also not a huge market (compared to say, oil) so subject to squeezes.
Bonds/stock movement in Russia/China also manipulated (at least short-term); harder in US due to rule-of-law (excepting Nancy P).
Movement of IRS funds to the TGA drain the money stock and reserves.
I really appreciate and enjoy your “Gold vs Faith in Central Banks” chart.
Perhaps add “Faith in central Banks and Paper with Ink on it Fiat Currency.
Here in the USA the Banksters demonitized Gold as to not have any competition to their unlimited production of paper with ink on it currency.
That is THE big deal, *the currency label* in the minds of the people.
A favourite example is India where the gold jewellery is used as a currency daily.
Some time ago there was a video of a guy on the street with a microphone offering folks a Hershey bar or a Double Eagle coin, and the candy bar was selected every time.
IMHO the COSTCO gold sales is a HUGE event indicating the retail appetite for the gold, and now also silver.
What is “faith in central banks” and how do you measure it?
Mathematically the formula would be:
Faith in Banks = 1 / Price of Gold
So logically Faith = 1 / 2500 = .0004 or 0.04% seems pretty low to me.
Some day when gold = $1 then Faith in Central Banks = 100%
Everything in the universe can be broken down to math, you just need to find the right equation.
I think the numerator there is ridiculously low, but in any case with this formula it’s a self fulfilling prophecy that when gold goes up faith in central banks goes down and vice versa. Not very useful as a gold price predictor.
Well I didn’t create the theory, I merely transformed it into mathematical form. Some obvious issues are if gold = $0 then central bank faith goes to infinity. Inversely, if central banks collapse then gold goes to infinity. I think the theory needs some work! How does one trade an infinite value of gold for goods and services?
But if you don’t like the formula perhaps you could come up with some dot plots or hedonistic adjustments to the price of gold just like the BLS does with inflation so we can all pretend to know what drives the price of gold or inflation or any other statistic and tweak it to our liking.
That’s what I’m wondering about this faith in central banks versus gold price theory. Seems like baloney just like any other theory.
If a theory can’t be converted to math, it’s nonsense, so you may be onto something.
What is faith in “anything”?
Tell me one thing you trust about the US government?
Tell me one public figure you trust?
When everything is fake…
Gold and silver become real again.
Fake democracy
Fake schools
Fake food
Fake courts
Fake justice
Fake false flags
Fake congressman
Fake boys and fake girls
Fake freedom
Fake history
Fake religions
Fake Jews
The only other thing besides metal that’s not fake is the greedy war industry that robs the productive class with the help of their slimy politicians.
If J.Powell cuts rates (politically), then gold to-the-moon! (and bonds to the dumper as mentioned by Mish).
The economy is on life-support from fiscal policy (goberment jobs/cash) counteracting the monetary tightening.
With fiat and stocks plummeting and the inflationary depression devastating all enterprise, the relative safety of physical gold will continue to attract buyers.
Physical attracted me Sunday, scored a 1899 five rouble gold piece that looked lonely, $310. My biggest peril is the numismatic bug. The prices of popular coins such as slabbed Carson City Morgans have gone up appreciably over the past decade. My coin guy is having trouble sourcing silver rounds and gold at prices that allow reselling for modest profit. But it’s worth it. The feeling of being suspended over a bottomless void is what I imagine owning crypto feels like when it’s freefalling. When gold went under $1900 not a few months ago, those who held physical had only to wait a bit, and in the meantime their hands weren’t empty or grasping their cold wallet and wondering when some “anonymous” crypto-whale or computing breakthrough or government edict was going to sink their pirogue. If it’s so great, why is there any for sale? To realize a profit, ETFs aside, you have to sell, and find someone who thinks that you are a fool for selling to buy from you. I’m not smart enough for cryptos. I want an asset to hold that’s so respected that nobody cares about who used to hold it. Truly, pecunium non olit. But only real money has no counter party risk.
rickm