JP Morgan And Citi Are Using OTC Derivatives To Manipulate Gold And Silver

Financial regulators around the world have recognized an immediate and pressing need to address possible regulatory protections in the OTC derivatives market.   – Brooksley Born, 1998 as Chairman of the CFTC – LINK

(Please note:  this scheme too will blow up in their face just like Long Term Capital, Enron, Bear Stearns, Lehman, AIG/Goldman.  The taxpayers will be bailing out the banks – and now we know why Citigroup wrote the legislation that enabled banks to move their OTC derivatives positions to their FDIC insured units – but gold and silver will go parabolic)

Back in the late 1990’s, the then head of the CFTC – Commodities and Futures Trading Commission,  the Government entity which is supposed to oversee futures and derivatives markets (enforce the laws in place to prevent criminal activity in these markets) – Brooksley Born embarked on an effort to impose oversight and regulation on the burgeoning OTC derivatives markets.  We all saw back then the dangers they impose on the system when Long Term Capital imploded and almost took down the global financial system.

I was a junk bond trader back then and vividly remember the entire affair.  In fact, Bankers Trust was the pioneer in OTC derivatives and it also had to pony up the most amount of money to bail out the system from Long Term Capital.  I also had been involved in using OTC high yield derivatives – unregulated – to hide large, risky and illiquid junk bond positions from the Bankers Trust risk management team.  We always did this right before the period in which the bank began calculating bonus pools.  In other words I know first-hand the many ways in which OTC derivatives can be used in corrupt ways to game the system and squeeze enormous profits from the markets.  “Markets” meaning, the people on the other side of your trade.

Of course, Robert Rubin,  Larry Summers and Alan Greenspan put on a full-force lobbying effort to destroy Ms. Born’s effort in Congress and the rest is history.  OTC derivatives are not only financial nuclear weapons of mass destruction, they are right now about the only source of real cash flow for the big banks.

But they are also used to inflict criminal manipulation on the gold and silver markets.  Dr. Paul Craig Roberts and I have written an article outlining the most likely way in the which the big big bullion banks – primarily JP Morgan and Citigroup – are implementing the recent massive spike up in gold and silver OTC derivatives in order to manipulate and suppress the price of gold and silver.   Bear in mind that, thanks the Rubin/Summers/Greenspan triumvirate, we have absolutely no way of knowing exactly how these securities are structured.  And yet – as we’ve seen with Long Term Capital, Enron, Bear Stearns, Lehman, AIG and Goldman – they can catastrophically effect our lives financially.

Are Big Banks Using Derivatives To Suppress Bullion Prices?

Paul Craig Roberts and Dave Kranzler

We have explained on a number of occasions how the Federal Reserves’ agents, the bullion banks (principally JPMorganChase, HSBC, and Scotia) sell uncovered shorts (“naked shorts”) on the Comex (gold futures market) in order to drive down an otherwise rising price of gold. By dumping so many uncovered short contracts into the futures market, an artificial increase in “paper gold” is created, and this increase in supply drives down the price.

This manipulation works, because the hedge funds, the main purchasers of the short contracts, do not intend to take delivery of the gold represented by the contracts, settling instead in cash. This means that the banks who sold the uncovered contracts are never at risk from their inability to cover contracts in gold. At any given time, the amount of gold represented by the paper gold contracts (“open interest’) can exceed the actual amount of physical gold available for delivery, a situation that does not occur in other futures markets.

You can read the rest of this here:   OTC Derivatives Are Used Manipulate Gold And Silver

Click to enlarge:

GOLD_Q1SilverOTCderivs1

10 thoughts on “JP Morgan And Citi Are Using OTC Derivatives To Manipulate Gold And Silver

  1. It is my suspicion that the majority of the manipulation is done via HFT wash trades. The “official price” is actually the last price that a trade occurred at. If bank A sells 200 Million ounces of silver to bank B at $15.50, then that is the official price. Bank B will then sell it back to bank A at the same price. The proof is in the insane official Comex volumes of about 500 Million ounces per day, but the unofficial volumes can be in the billions of ounces per day.

    Regarding naked shorting, yes they are doing that too, but that it mostly just the result of having to be the seller of last resort to the non-bankster silver longs.

    Most of the price manipulation is via HFT wash trades.

  2. I’ve got this great idea; Lets manipulate the price of Gold & Silver down, down, down so resource rich countries like Africa, Mexico, Peru, Bolivia, Chile, and a whole pile of other resource rich 3rd world countries don’t have the pricing power to feasibly develop vibrant & highly profitably precious metals industries … this way we can keep these countries in perpetual poverty which will allow us to buy up all their resources for pennies on the Dollar!!!! …. and we can even keep these countries in perpetual debt slavery to the World Bank and IMF!!!! …. great idea huh!.

  3. http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20150707000107&cid=1202
    China sees surge in precious metal trading
    Staff Reporter 2015-07-07 17:15 (GMT+8)

    EXCERPTS:

    “China recently saw trades of precious metals hit new highs and several companies introduced new investment products that are more accessible to average investors, according to the Guangzhou Daily.
    The Shanghai Gold Exchange (SGE) posted a record trading volume of 48.33 million grams in a single day in late June, even though global gold prices remain bearish, the paper said…

    Several precious metals trading platforms in China have also witnessed a rebound and record trading volumes since mid-May, the newspaper reported. The Guangdong Precious Metals Exchange said the number of institutional investors more than tripled from a year earlier, while trading volume in June nearly doubled from last year.
    To generate more profits in a bear market, 24% of the precious metals trading platforms in China have introduced energy-related products and some have even opened trading in recent months in rare agricultural products such as ginseng, the report said.

    Meanwhile, the SGE, which has led markets in gold trading volume for the past eight years, is seeking greater price-setting power and is set to launch the Shanghai-Hong Kong Gold Connect program on July 10, which will bring in more foreign investors, the newspaper said…”

    The sweet irony of the price supression
    Tastes sweeter with more repression.
    Bank interventions look uglier still,
    Causing Asian platforms to fill-
    Ingredients for a price correction.

    And

  4. http://www.marketwatch.com/story/china-wants-to-steal-gold-market-reins-from-new-york-london-2015-07-09?link=MW_latest_news

    Interesting article regarding China wanted to ‘take-over’ the reins from New York and London. Here is an excerpt from the article…

    “Control over the gold price is exercised in New York and London, leaving China at the mercy of those two centers,” he said.

    So despite China’s huge presence in the physical market, it hasn’t had much control over the global gold price.

    Having New York and London as the price-setting locations has “kept gold prices well below the level of demand and supply should reflect,” Phillips said. China does not want an uncontrolled gold price, but it also “does not want the U.S./U.K. to have control over this market if they are minor players.”

  5. http://www.marketwatch.com/story/china-wants-to-steal-gold-market-reins-from-new-york-london-2015-07-09?link=MW_latest_news

    Interesting article regarding China wanting to ‘take-over’ the reins from New York and London. Here is an excerpt from the article…

    “Control over the gold price is exercised in New York and London, leaving China at the mercy of those two centers,” he said.

    So despite China’s huge presence in the physical market, it hasn’t had much control over the global gold price.

    Having New York and London as the price-setting locations has “kept gold prices well below the level of demand and supply should reflect,” Phillips said. China does not want an uncontrolled gold price, but it also “does not want the U.S./U.K. to have control over this market if they are minor players.”

  6. As long as she’s being quoted judge her also in light of her genuflecting speech—
    http://www.cftc.gov/opa/speeches/opaborn-39.htm
    “I am pleased to be asked to speak today to members of the Silver Users Association. Having represented a client in the cases and investigations relating to the 1980 manipulation of the world silver market by the Hunt brothers and others, I continue to have a special interest in the silver market.” (October 28, 1998)

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