Posts tagged Futures
By Dr. Paul Craig Roberts and Dave Kranzler
Market Manipulations Become More Extreme, More Desperate
In two recent articles we explained the hows and whys of gold price manipulation. The manipulations are becoming more and more blatant. On February 6 the prices of gold and stock market futures were simultaneously manipulated.
On several recent occasions gold has attempted to push through the $1,270 per ounce price. If the gold price rises beyond this level, it would trigger a flood of short-covering by the hedge funds who are “piggy-backing” on the bullion banks’ manipulation of gold. The purchases by the hedge funds in order to cover their short positions would drive the gold price higher.
With pressure being exerted by tight supplies of physical gold bars available for delivery to China, the Fed is growing more desperate to keep a lid on the price of gold. The recent large decline in the stock market threatened the Fed’s policy of taking pressure off the dollar by cutting back bond purchases and reducing the amount of debt monetization.
Thursday, February 6, provided a clear picture of how the Fed protects its policy by manipulating the gold and stock markets. Gold started to move higher the night before as the Asian markets opened for trading. Gold rose steadily from $1254 up to a high of $1267 per ounce right after the Comex opened (8:20 a.m. NY time). The spike up at the open of the Comex reflected a rush of short-covering, and the stock market futures looked like they were about to turn negative on the day. However, starting at 8:50 a.m., here’s what happened with Comex futures and S&P 500 stock futures:
At 8:50 a.m. NY time (the graph time-scale is Denver time), 3,225 contracts hit the Comex floor. During the course of the previous 14 hours and 50 minutes of trading, about 76,000 total April contracts had traded (Globex computer system + Comex floor), less than an average of 85 contracts per minute. The 3,225 futures contracts sold in one minute caused a $15 dollar decline in the price of gold. At the same time, the stock market futures mysteriously spiked higher:
As you can see from the graphs, gold was forced lower while the stock market futures were forced higher. There was no apparent news or market events that would have triggered this type of reaction in either the gold or stock market. If anything, the trade deficit report, which showed a higher than expected trade deficit for December, should have been mildly bullish for gold and bearish for the stock market. Furthermore, at the same time that gold was being forced lower on the Comex, the U.S. dollar index experienced a sharp drop in price and traded below the 81 level of support. The fall in the dollar is normally bullish for gold.
The economy is getting weaker. Fed policy is obviously failing despite recent official pronouncements that the economy is improving and that Bernanke’s monetary policies succeeded. A just published study by Jing Cynthia Wu and Fan Dora Zia concludes that the the positive impact of the Federal Reserve’s policy of quantitative easing is so slight as to be insignificant. The multi-trillion dollar expansion in the Federal Reserve’s balance sheet lowered the unemployment rate by little more than two-tenths of one percent, raised the industrial production index by 2 percent, and brought about a mere 34,000 housing starts. http://econweb.ucsd.edu/~faxia/pdfs/JMP.pdf
The renewal of the battle over the debt ceiling limit is bullish for gold and bearish for stocks. However, with the ongoing manipulation of the gold price and stock averages via gold and stock market futures, the normal workings of markets that establish true values are disrupted.
A rising problem for the manipulators is that the West is running low on gold available for delivery to China and other Asian buyers. In January China took delivery of a record amount of gold. China has been closed since last Friday in observance of the Chinese New Year. As China resumes purchases, default on delivery moves closer.
One way for the Fed and bullion banks to hold off defaulting on Chinese purchases is to coerce holders of gold futures contracts to settle in cash, not in delivery of gold, by driving down the price during heavy Comex delivery periods. This is what likely occurred on Feb. 6 in addition to the Fed’s routine price maintenance of gold.
As of Thurday’s (Feb. 6) Comex report for Wednesday’s (Feb. 5) close, there were about 616,000 ounces of gold available to be delivered from Comex vaults for February contracts totaling slightly more than 400,000 ounces, of which delivery notices for 100,000 ounces were given last Wednesday night. If the holders of the other 300,000 contracts opt to take delivery instead of cash settlement, February contracts would absorb two-thirds of Comex gold available for delivery.
The Comex gold inventory has been a big source of gold shipments from the West to the East, resulting in a decline of the Comex gold inventory by over 4 million ounces–113 tonnes–during the course of 2013. We know from reports from Swiss bar refiners that the 100 ounce Comex gold bars are being received by these refiners and recast into the kilo bars that the Chinese prefer and shipped to Hong Kong. With the amount of physical gold in Comex vaults rapidly being removed, the Fed/bullion banks use market ambush tactics such as those we describe above to augment and conserve the supply of gold available for delivery.
Readers have asked if gold can continue to be shorted on the Comex once no gold is left for delivery. From what we have seen–the fixing of the LIBOR rate, the London gold price, foreign exchange rates, the price of bonds and the manipulation of gold and stock market futures prices–we don’t know what the limit is to the ability of the Fed, the Treasury, the Plunge Protection Team, the Exchange Stabilization Fund, and the banks to manipulate the markets.
Paul Craig Roberts is a former Assistant Secretary of the US Treasury for Economic Policy. Dave Kranzler traded high yield bonds for Bankers Trust for a decade. As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.
Reprinted with permission from www.paulcraigroberts.org
About Dr. Paul Craig Roberts
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.
Gold, Einstein And The Great Fed Robbery
One of Einstein’s great contributions to mankind was the theory of relativity, which is based on the fact that there is a real limit on the speed of light. Information doesn’t travel instantly, it is limited by the speed of light, which in a perfect setting is 186 miles (300km) per millisecond. This has been proven in countless scientific experiments over nearly a century of time. Light, or anything else, has never been found to go faster than 186 miles per millisecond. It is simply impossible to transmit information faster.
Too bad that the bad guys on Wall Street who pulled off The Great Fed Robbery didn’t pay attention in science class. Because hard evidence, along with the speed of light, proves that someone got the Fed announcement news before everyone else. There is simply no way for Wall Street to squirm its way out of this one.
Before 2pm, the Fed news was given to a group of reporters under embargo – which means in a secured lock-up room. This is done so reporters have time to write their stories and publish when the Fed releases its statement at 2pm. The lock-up room is in Washington DC. Stocks are traded in New York (New Jersey really), and many financial futures are traded in Chicago. The distances between these 3 cities and the speed of light is key to proving the theft of public information (early, tradeable access to Fed news).
We’ve learned that the speed of light (information), takes 1 millisecond to travel 186 miles (300km). Therefore, the amount of time it takes to transmit information between two points is limited by distance and how fast computers can encode and decode the information on both sides. Our experience analyzing the impact of hundreds of news events at the millisecond level tells us that it takes at least 5 milliseconds for information to travel between Chicago and New York. Even though Chicago is closer to Washington DC than New York, the path between the two cities is not straight or optimized: so it takes information a bit longer, about 7 milliseconds, to travel between Chicago and Washington. It takes little under 2 milliseconds between Washington and New York.
Therefore, when the information was officially released in Washington, New York should see it 2 milliseconds later, and Chicago should see it 7 milliseconds later. Which means we should see a reaction in stocks (which trade in New York) about 5 milliseconds before a reaction in financial futures (which trade in Chicago). And this is in fact what we normally see when news is released from Washington.
However, upon close analysis of millisecond time-stamps of trades in stocks and futures (and options, and futures options, and anything else publicly traded), we find that activity in stocks and futures exploded in the same millisecond. This is a physical impossibility. Also, the reaction was within 1 millisecond, meaning it couldn’t have reached Chicago (or New York): another physical possibility. Then there is the case that the information on the Fed Website was not readily understandable for a machine – less than a thousandth of a second is not enough time for someone to commit well over a billion dollars that effectively bought all stocks, futures and options.
Minutes before the Fed announcement at 14:00 on September 18, 2013, there was significant activity in Comex Gold Futures (traded in Chicago) and the ETF symbol GLD (traded in New Jersey). This gives us an opportunity to measure closely, the exact (to the millisecond) amount of time between trading between these two instruments. The first two charts show about 3.5 minutes of time around the Fed Announcement release, giving us an overview. The stack of charts that follow allow you to easily compare between GLD (New York) and GC Futures (Chicago) for 6 different active periods. You will see that in the first 5 pairs – before the announcement, activity first shows up in GC Futures, followed by activity in GLD between 5 and 7 milliseconds later. In the last pair, which compares activity at exactly 14:00:00.000, you will see both GC futures and GLD react exactly at the same time.
See also: More Charts of Evidence.
1. Animation of December 2013 Gold (GC) Futures followed by GLD stock on September 18, 2013 from 13:57 to 14:00:30.
2. Zooming in 150 milliseconds of time for the high activity periods minutes before and during the annoucement.
The chart shows first, Gold Futures (GC – traded in Chicago) followed by GLD (traded in New York)and clearly show events minutes before the news release: you can clearly see that Gold Futures (GC) trades before GLD. The chart shows the event at 14:00:00, where Gold Futures trades at the exact same time as GLD stock. This is physically impossible unless information was already present in Chicago and New York. It’s easiest if you compare the bottom panels of each chart which shows trading volume for each millisecond.
There are 2 possibilities, and both aren’t good news for Wall Street.
1. Released by a News Organization
The Fed news was condensed by a news service into a simple “No Tapering” message that was placed on news servers co-located next to trading machines in both New York and Chicago at some time before 2pm. The news machines are programmed to release the information at precisely 2pm, allowing the algos to react immediately at both locations. This is how some news services release privately compiled statistics like the Consumer Confidence or Chicago PMI.
In those cases, we see the exact behavior as in the last 2 charts above – an immediate reaction in New York and Chicgo. But the Fed news was released from a lock-up room which prevents transmission of any information to the outside world. Given that several large news organizations were recently caught doing this we think it’s less likely they would do something so bold, so soon. That leaves us with possibility number 2.
2. Leaked to Wall Street
The Fed news was leaked to, or known by, a large Wall Street Firm who made the decision to pre-program their trading machines in both New York and Chicago and wait until precisely 2pm when they would buy everything available. It is somewhat fascinating that they tried to be “honest” by waiting until 2pm, but not a thousandth of a second longer. What makes this a more likely explanation is this: we’ve found that news organizations providing timed release services aren’t so good about synchronizing their master clock – and often release plus or minus 15 milliseconds from actual time. Their news machines in New York and Chicago still release the data at the exact same millisecond, but with the same drift in time as the master clock. That is, we’ll see an immediate market reaction at say, 15 milliseconds before the official scheduled time, but in the same millisecond of time in both New York and Chicago. Historically, these news services have shown a time drift of about 30 milliseconds (+/- 15ms), which places the odds that this event was from a timed news service at about 10%.
What also makes this the more likely conclusion is this: we know the Bureau of Labor Statistics has recently hardened access to their lock-up room, weeding out all but respected news organizations. So imagine a reporter for one of these news organizations who is tasked with distilling the Fed news into a simple message that machines could read in less than a millisecond and interpret to mean, “buy all the things now”.; It’s unlikely that Wall Street would place so much responsibility on one news reporter. It is also unlikely that respected news organizations would tolerate this behavior.
We think it was leaked. The evidence is overwhelming.
LBMA GOLD FLIGHT, 580 GOLD TONS PURCHASED, SILVER & MORE
“However, by manipulating the gold price lower through the foreign exchange interventions, they’ve succeeded in forcing 600 tons of ETF redemptions, COMEX capitulation, and drawn in an unprecedented level of fresh managed money short supply. This has now successfully allowed the bailout of the bullion banks to the point where they have been able to get net long (gold) futures. The two primary bullion banks that we all know about are net long.
But from a cash forex trading (currency trading) point of view, we are definitely still seeing aggressive official intervention, including the post-Bernanke smash (in the metals). Any time he speaks we get the same thing. The problem is this cash market intervention is also causing precious (metals) bullion inventories to deplete at a much faster rate than if gold was priced at $1,900.
Editor’s Note: This clip below was relevant to the above…
The Golden (Sentiment) Rule: If It Isn’t Off The Chart Now, It Soon Will Be
Submitted by Tyler Durden (ZeroHedge) on 06/28/2013 – 19:49
Remember: what is unsustainable, can never crash…
My interview of David Morgan Silver-Investor – Confirmed U.S. banks will go Cyprus. Paper prices separating from physical. Get metals while you can!
The blue print has been established.
Great last minute interview with David and he provides Very Important information. He points out Everyone needs to protect themselves, immediately. The Physical market is tight now and getting tighter even in the U.S., get gold and silver right now while you can.
He says the U.S. citizens need to Wake Up and get smart and informed NOW!
On the Sunday, August 12 edition of Infowars Live, Alex hosts Max Keiser discussing the ravaged state of the U.S. economy and fragility of markets as published in a recent Fox News article The Coming Economic Collapse.
G Edward Griffin, author of “The Creature From Jekyll Island,” is our guest this week on http://www.FinancialSurvivalRadio.com to talk about the corrupt origins of the Federal Reserve, why the US Dollar is just “one big scam,” and the 3 things you can do right now to prepare for the coming hyperinflation and US Dollar collapse.
To hear the entire show, go to http://www.FinancialSurvivalRadio.com and listen to episode number 12.
By Timothy Noah
Jon Corzine’s testimony before the House agriculture committee may mark the definitive end to the Democratic party’s love affair with Wall Street.
Once upon a time, Wall Street bankers were Republicans. Not terribly ideological, they preferred whenever possible a minimum of taxation, regulation, and government in general, but they didn’t make a fetish of it. As the GOP moved right starting in the mid-1960s the east coast Republican establishment began to crumble, and by the late 1980s it was mostly gone. These silk stocking conservatives had been driven out of the Republican party by a social agenda that frightened them, a budget deficit that threatened their livelihoods, and a base that increasingly viewed moderates as RINOs (“Republicans In Name Only”).
By the early 1990s Wall Street was ready to go Democratic. In his new book, Back To Work, former President Bill Clinton writes,
“For every person on Wall Street who resembles the character Michael Douglas played in the Wall Street movies, there are many others who give lots of money every year to increase educational and economic opportunities for poor kids and inner-city entrepreneurs.
“Most of these people are grateful for their success and know that because of current economic circumstances, they’re in the best position to contribute to solving our long-term debt problem and to making the investments necessary to restore our economic vitality. Many of them supported me when I raised their taxes in 1993, because I didn’t attack them for their success. I simply asked them, as the primary beneficiaries of the 1980s growth and tax cuts, to help us balance our budget and invest in our future by creating more jobs and higher incomes for other people.”
In crafting his first budget bill, Clinton was mindful of the bond market to such a degree that James Carville famously complained, “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 basball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
The Wall Street-Democratic Party love affair came out of the shadows and into the sunlight when Robert Rubin, former co-chairman of Goldman Sachs, became Treasury secretary. The economy was booming, the budget deficit was disappearing, and all was right with the world. The romance deepened through most of the aughts, so much so that in 2010 Rich Lowry of National Review complained, “the Democratic majority was bought and paid for by Wall Street and corporate money.” In 2008 the finance sector actually gave more to the Democrats than to the Republicans, something that hadn’t happened since 1990.
It all started to come apart in the late aughts as Democrats realized that Rubin’s distaste for financial regulation (and that of his deputy and successor, Larry Summers, which was more pronounced) had contributed to the 2008 financial meltdown, in part because Rubin and Summers had outmaneuvered Brooksley Born, chairman of the Commodity Futures Trading Commission, when she wanted to regulate derivatives. Summers (who wasn’t from Wall Street but was a Rubin acolyte) became director of the National Economic Council during President Barack Obama’s first two years in office and the economy floundered. That deepened the alienation between Democrats and Wall Street.
Passage of the Dodd-Frank financial reform law drove the lovebirds further apart as Wall Street enlisted Republican goons first to weaken the bill (and succeeded in many instances) and then to neuter it by pressuring federal agencies to write regulations that created as little accountability as possible.