Serpo
19th August 2010, 01:37 AM
A long but worth while article if you go to the link....
The Failure of the Second London Gold Pool
By: Adrian Douglas
-- Posted Thursday, 19 August 2010 | Digg This ArticleDigg It! | Share this article | Source: GoldSeek.com
This article is a sequel to my article entitled “Gold Market is not “Fixedâ€, it’s Rigged†which is essential reading before reading this article. The previous article demonstrated that had a trader consistently bought gold on the London AM Fix and sold it the same day on the London PM Fix and repeated it every day from April 2001 through to today the cumulative loss would be $500 per ounce. Yet gold has been in a bull market during that time and a “buy and hold†strategy over the same time period would have returned a gain of $950 per ounce.
I have termed the arithmetic difference between the PM Fix and the AM Fix the “intraday change.†Figure 1 shows the evolution of the cumulative intraday change from 2001 to 2010 along with the gold price evolution as expressed by the London PM Fix price.
Figure 1 Cumulative Intraday Change & PM Gold Fix Price (2001-2010)
This chart shows that an entity (or more likely several entities) is consistently selling gold into the PM Fix in such large quantities that the selling suppresses the gold price to the extent that the cumulative intraday change is negative while the gold price has been increasing. The entity doing such selling must have access to a large amount of physical gold and must not be interested in selling for profit. The only possible culprit is a central bank or several central banks. As the central banks do not trade directly, there must be bullion banks who are acting on their behalf.
The London Gold Fix is conducted by the representatives of five bullion banks: HSBC, Deutsche Bank, Scotia Mocatta, Societe Generale, and Barclays. The “fix†is no longer conducted in an actual meeting but by conference call. The bullion banks’ representatives communicate with their trading floors and with each other during the conference call to find the clearing price at which all buying interest and all selling interest is balanced. When this price is determined the price is said to be “fixedâ€. This is exclusively a physical gold market activity. It is balancing the number of bars of gold for sale with the number of bars demanded for purchase at a particular price.
It follows that if buying and selling were matched at the AM Fix price but then the PM Fix price is lower, then significantly more gold is being offered for sale compared to demand at the time of the PM fixing. The trend of the cumulative intraday change in Figure 1 shows that the selling into the PM Fix is manipulative because it has consistently countered the primary trend of the market and has proportionately increased as the gold price has increased. The PM Fix is the target for manipulation (price suppression in this case) because it stands as the global bench mark price at which physical gold trading is done until the following AM Fix, -- that is, a period of 19 ½ hours each day.
Though the official London Gold Pool disbanded in 1968 when it suffered massive outflows of bullion trying to frustrate free market forces that were manifesting themselves as insatiable demand for the metal, someone is now operating, albeit covertly, a second London Gold Pool. However, what I will show unequivocally in this article is that this “Second London Gold Pool†is about to suffer the exact same fate as the first one did.
Figure 2 Peaks Marking Climax of Increased Selling into the PM Fix
In figure 2 the same data as in Figure 1 is presented except it has been truncated to October 2008. The solid blue line shows that there is a long-term trend in the evolution of the intraday price change that is responsible for the general suppression of the price. However, what is also apparent is that there are many occurrences of the cumulative intraday price change deviating downward from this baseline trend and returning back to the trend. These are periods of concerted and increased dumping of gold into the PM fix. The red vertical lines mark the turning points of maximum departure of the cumulative intraday price change from the solid blue line that defines the average long-term trend. In other words, these lines mark the climax of selling into the PM Fix. It can be noted that these lines intersect the PM Fix price curve at almost exactly the lows immediately following a price peak. This means that when the intensity of selling into the PM Fix increases (an increasing downward excursion of the blue curve away from its trend line), the gold price makes an intermediate top, and when the intensity of selling into the PM Fix recedes (the blue curve returns toward its trend line), the gold price makes a bottom.
This is not a matter of traders selling into the market to take profits when the price reaches an interim top, because the selling is consistently forcing the PM Fix price to be lower than the AM Fix even during price rallies. The selling is clearly conducted such that when considered over several days buying between the fixes is not allowed to be more dominant than selling. It can be seen that after each selling climax buying emerges which carries the cumulative intraday change back toward its long-term negative trend line (solid blue line). I would speculate that at least part of this buying is made by the same entities that did the selling.
MORE AT LINK WITH CHARTS..................
http://news.goldseek.com/GATA/1282198140.php
The Failure of the Second London Gold Pool
By: Adrian Douglas
-- Posted Thursday, 19 August 2010 | Digg This ArticleDigg It! | Share this article | Source: GoldSeek.com
This article is a sequel to my article entitled “Gold Market is not “Fixedâ€, it’s Rigged†which is essential reading before reading this article. The previous article demonstrated that had a trader consistently bought gold on the London AM Fix and sold it the same day on the London PM Fix and repeated it every day from April 2001 through to today the cumulative loss would be $500 per ounce. Yet gold has been in a bull market during that time and a “buy and hold†strategy over the same time period would have returned a gain of $950 per ounce.
I have termed the arithmetic difference between the PM Fix and the AM Fix the “intraday change.†Figure 1 shows the evolution of the cumulative intraday change from 2001 to 2010 along with the gold price evolution as expressed by the London PM Fix price.
Figure 1 Cumulative Intraday Change & PM Gold Fix Price (2001-2010)
This chart shows that an entity (or more likely several entities) is consistently selling gold into the PM Fix in such large quantities that the selling suppresses the gold price to the extent that the cumulative intraday change is negative while the gold price has been increasing. The entity doing such selling must have access to a large amount of physical gold and must not be interested in selling for profit. The only possible culprit is a central bank or several central banks. As the central banks do not trade directly, there must be bullion banks who are acting on their behalf.
The London Gold Fix is conducted by the representatives of five bullion banks: HSBC, Deutsche Bank, Scotia Mocatta, Societe Generale, and Barclays. The “fix†is no longer conducted in an actual meeting but by conference call. The bullion banks’ representatives communicate with their trading floors and with each other during the conference call to find the clearing price at which all buying interest and all selling interest is balanced. When this price is determined the price is said to be “fixedâ€. This is exclusively a physical gold market activity. It is balancing the number of bars of gold for sale with the number of bars demanded for purchase at a particular price.
It follows that if buying and selling were matched at the AM Fix price but then the PM Fix price is lower, then significantly more gold is being offered for sale compared to demand at the time of the PM fixing. The trend of the cumulative intraday change in Figure 1 shows that the selling into the PM Fix is manipulative because it has consistently countered the primary trend of the market and has proportionately increased as the gold price has increased. The PM Fix is the target for manipulation (price suppression in this case) because it stands as the global bench mark price at which physical gold trading is done until the following AM Fix, -- that is, a period of 19 ½ hours each day.
Though the official London Gold Pool disbanded in 1968 when it suffered massive outflows of bullion trying to frustrate free market forces that were manifesting themselves as insatiable demand for the metal, someone is now operating, albeit covertly, a second London Gold Pool. However, what I will show unequivocally in this article is that this “Second London Gold Pool†is about to suffer the exact same fate as the first one did.
Figure 2 Peaks Marking Climax of Increased Selling into the PM Fix
In figure 2 the same data as in Figure 1 is presented except it has been truncated to October 2008. The solid blue line shows that there is a long-term trend in the evolution of the intraday price change that is responsible for the general suppression of the price. However, what is also apparent is that there are many occurrences of the cumulative intraday price change deviating downward from this baseline trend and returning back to the trend. These are periods of concerted and increased dumping of gold into the PM fix. The red vertical lines mark the turning points of maximum departure of the cumulative intraday price change from the solid blue line that defines the average long-term trend. In other words, these lines mark the climax of selling into the PM Fix. It can be noted that these lines intersect the PM Fix price curve at almost exactly the lows immediately following a price peak. This means that when the intensity of selling into the PM Fix increases (an increasing downward excursion of the blue curve away from its trend line), the gold price makes an intermediate top, and when the intensity of selling into the PM Fix recedes (the blue curve returns toward its trend line), the gold price makes a bottom.
This is not a matter of traders selling into the market to take profits when the price reaches an interim top, because the selling is consistently forcing the PM Fix price to be lower than the AM Fix even during price rallies. The selling is clearly conducted such that when considered over several days buying between the fixes is not allowed to be more dominant than selling. It can be seen that after each selling climax buying emerges which carries the cumulative intraday change back toward its long-term negative trend line (solid blue line). I would speculate that at least part of this buying is made by the same entities that did the selling.
MORE AT LINK WITH CHARTS..................
http://news.goldseek.com/GATA/1282198140.php