Gold Manipulation And Conflict Gold

The king of high frequency trading, Nanex’s Eric Hunsader, has been on a crusade lately to expose the problematic and illegal manipulative side of HFT/algo-driven trading.  No where on earth is the manipulation of any market more blatant and in-your-face illegal than in the paper gold market.   Yesterday morning Hunsader tweeted out this, after the gold was taken down hard in the paper gold market:

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Gold was smashed at exactly 8:20 a.m. EST when the gold pit at the Comex opened. The initial hit involved the dumping of 2,748 contracts – or 274,800 ozs of paper gold – in the first minute of floor trading. The Comex is only reporting 162,221 ozs of “registered,” deliverable gold. Hmmm…From 8:00 a.m. – 9:00 a.m, 29,136 contracts traded, representing 2.9 million ozs of gold traded, most of it in the first 40 minutes after the floor trade.

Without a doubt, the blatant nature of the manipulation reflects the degree of desperation felt by the Fed and the bullion banks to keep a lid on the price of gold given that the Fed is unable to raise interest rates without crashing the system.

The blatant manipulation of gold further reflects a bigger problem facing the western Central Banks and bullion banks:  the growing scarcity of gold available to deliver into entitled buyers like India and China.   The Shanghai Gold Exchange withdrawals continued at record levels in September and even Bloomberg is reporting this now:   LINK.

And the big festival seasons are about to begin in India and the Middle East:   LINK

One last point that I believe is perhaps the strongest indicator that the wholesale gold bullion market is as tight as it’s ever been.  “Conflict gold” is now thought to be part of the gold which is flowing into big buyers like India.  “Conflict gold” is gold bars in dore form that are produced in places like Ghana by mines using child-labor or by mines controlled by contra-Government rebel groups in the Congo.

Allegations have surfaced that this conflict gold showing up at refiners in India.  Although the only western gold market writer I’m aware of who is tracking the dore bar market  in India is John Brimelow (John Brimelow’s “Gold Jottings”), India has been shifting a measurable portion of its imports to dore bars.  Dore bars are 80-85% purity bars that are processed by mines and sent to refiners for further processing.

The reason the Indian demand-mix has shifted more toward dore bars, I believe, is two-fold:  1) the dore bars are subjected to a significantly lower import duty than LBMA-quality bars and  2) it reflects the inability of the global market to produce enough deliverable LMBA-quality bars to meet Indian demand.

The shift in demand toward dore bars is one of the primary reasons that the mainstream media like Reuters, the UBS metals group and Dennis Gartman are reporting that gold demand in India is weak right now.  They only track the ex-duty premiums of the LBMA-quality bar imports into India and completely ignore – or, more likely, are unaware of – the booming dore bar imports.  Currently the ex-duty import premiums are negative, reflecting weak demand for those bars. However,  the premiums paid for dore bars reflect booming demand for those bars.

untitledI guess it’s only a matter of time before we get another avalanche of anti-gold media propaganda and thoroughly misleading and factually unsubstantiated garbage analysis from bullion bank apologists like the Perth Mint and Jeffrey Christian.

8 thoughts on “Gold Manipulation And Conflict Gold

  1. Dave,
    I have followed you work for a long time. really appreciate your efforts to expose the fraud ridden and thoroughly corrupted COMEX. The shills and apologists like Nadler, Suchecki and Christian have zero credibility imo.

    Keep up the good work.

    Aloha and best wishes,
    Bay of Pigs

  2. Jeffrey Christian is the worst of all. What an asswipe! You know the kind of guys running Kitco when they have regular interviews with that windbag.

    I just wonder where all this gold is coming China, India and Turkey bought in August. This whole charade can’t go on forever. We’re on the road to “The Road”!

    I lived for some years in Dubai during the boom times. You wouldn’t believe how the Indians are buying gold in the jewellery shops. The first time I thought the shop must give away something for free or there is some marketing campaign going on. No, just “regular” buying during some Indian festival times. The Indians would have already killed the gold manipulations if the US government didn’t step in and gave the Indian government orders on their gold tariffs.

    … am busy now. Have to watch “The Road”!!! 🙂

  3. The paper market’s ability to set actual bullion prices could be ended overnight if government and its regulators cased supporting that role and required all paper contracts to be 100% backed by actual, issuer-owned and unencumbered physical bulllon. But that’s not going to happen because governments NEED the paper market.

    One thing that would greatly help end the paper market’s ability to determine the price of bullion would be to have miners market their output directly to, and even obtain credit from, end users, rather than involve bullion banks, Comex, LBMA and such.

  4. I’m all new to this.
    My knowledge of this only goes as far as the Comex, so I got a shock when I saw the Perth Mint at the end of this article.
    I have been thinking about buying gold recently, so as an Australian, I rang the Perth Mint to inquire how I go about buying gold and silver.
    I asked the sales person on the other end of the line (naïvely) whether they knew about what was going on at the Comex? He rather sheepishly declined to offer any information on the Comex, but I just felt that he did not want to touch the subject.
    I guess now it was rather naive of me to ask that question.
    I suppose it was like going into my local butcher shop, and asking the butcher how much fat is in his sausages.
    Can someone enlighten me as to what monkey business is going on at the Perth Mint?

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