They often “fix” the price of gold at the London a.m. price fix – that’s for sure. Although the LBMA London gold fix mechanism was supposedly cleaned up and reformed, those of us who have studied the gold market for at least the last 14 years know that the London “fix” is still the same old corrupt price-fix scheme.
Last night was particularly blatant, as gold was threatening to break over the key 200 day moving average technical level ($1,176 on the continuous contract basis) – note: the x-axis is Mountain Standard Time, all references are in EST – click to enlarge:
As you can see from the graph above, the price of gold was moving laterally during most of Asian/Indian trading hours. Not shown is the $9 gap up in the price of gold about an hour in to the Globex system trading session (9:10 p.m EST) when China devalued the yuan.
In the half-hour of the designated London a.m. “Fix” period, 9,620 paper/electronic Comex gold contracts traded, representing 962,000 ozs of gold (the Fix is a process, not a point in time). This is compared to the 171k ozs of gold reported by the Comex vault custodians as being “deliverable.” In the 30-minute period prior to the London “Fix,” a mere 1,260 paper/electronic gold contracts traded. In the 30-minutes subsequent to the “Fix,” 2,871 contracts exchanged hands. Please note: there were no news reports or events that would have influenced any of the trading markets during the London “Fix.”
Personally, I’d like to see an independent audit of the bars – visually open to the public – which includes all of the record-keeping associated with each bar. In other words, contrary to most well-read gold market analysts, I do not trust or believe the vault reports as submitted by the HSBC, Scotia and JP Morgan, who control 96% of the total reported on the Comex.
It’s pretty obvious that as the price of gold threatened to take out a key technical level, a large seller dumped an “electronic contract bomb” on the market, which triggered hedge fund algo technically-driven selling as a means to take the price down.
Interestingly, gold shot right back up after the dismal U.S. retail sales report released at 8:30 a.m. EST. There’s no question that – at least for now anyway – gold is behaving differently than it has over the past four years. It seems that price hits are being bought rather than chased lower and moves higher are being chased higher rather than being sold.
Certainly the fundamental support underlying the gold market continues to strengthen every day, as it has for the last 15 years.