gold market manipulation: despite the media lock-down, the word is getting out.

[h3rm35]

It's A Ponzi Scheme the Gold Market

by Nathan Lewis

We've had a string of amazing revelations recently regarding the world's precious metals market. This is important stuff for anyone (like me) who holds gold as a means to avoid currency turmoil and counterparty risk.



(My earlier post on shenanigans at the Comex gold market.)



This news has been actively suppressed in the mainstream media.



The Commodity Futures Trading Commission, a U.S. government regulatory agency, held hearings in Washington D.C. in late March regarding position limits in the futures market.



People involved in the markets have known/suspected for years that they have been manipulated by certain large entities, notably JP Morgan and Goldman Sachs.



Analysts like silver maven, Ted Butler, hedge fund giant, Eric Sprott, and the Gold Anti-Trust Action Committee (GATA) have been collecting evidence of this manipulation for years.



These hearings were supposed to be a non-event. However, despite the media lock-down, the word is getting out.



The CFTC, like the SEC, is a conflicted agency. Some people, notably Chairman Gary Gensler and Commissioner Bart Chilton, seem to want to clean up the sleaze, fraud and corruption.



The CFTC even invited GATA's Bill Murphy and Adrian Douglas to make statements. Would you be surprised to learn that the cameras had a "technical malfunction" during Bill Murphy's statement, which magically righted itself immediately after he finished?



After the hearing, according to Douglas, Murphy was contacted by several major media outlets for more interviews. Within 24 hours, all the interviews were canceled. All of them.



You can follow the links above to see the research that Butler, Sprott and GATA have done over the years. That was only one part of the emerging story.



The second part is the appearance of London metals trader and now whistleblower Andrew Maguire, who understands JP Morgan's manipulation scheme inside and out.



Maguire understands the process so well that he was able to describe it to the CFTC's Bart Chilton on the phone in real time. As in: "in a few minutes, they are going to do this, and then they will do that."



Listen to an extended interview with Maguire and GATA's Adrian Douglas on King World News here.



Maguire has taken some personal risks to tell all this in public. In fact, almost immediately after his initial statements, he was run over by a car while walking down the street. The driver sped away, nearly running over some other pedestrians in his haste to escape. Fortunately, Maguire survived the hit-and-run "accident" with minor injuries. What a coincidence.



The third item was during the question-and-answer session at the CFTC hearings. GATA's Adrian Douglas.



For many years, people assumed that the London Bullion Market Association (LBMA), the world's largest gold market, was a simple bullion market. Cash for gold. However, just in the past few months, more people are realizing that there is actually very little gold within the LBMA system.



Even long-time gold specialists like Maguire have been amazed to learn that there is no gold corresponding to the vast "gold deposits" at the major LBMA banks.



During the CFTC hearings, Jeffrey Christian of CPM Group apparently informed us that the LBMA banks actually have about a hundred times more gold deposits than actual gold bullion.



(GATA on CFTC hearing revelations, including video clips.
ZeroHedge on the LBMA "paper gold ponzi")



This means that there are thousands of clients -- Asian and Middle Eastern governments and sovereign wealth funds among them -- who think they own hundreds of billions and perhaps trillions of dollars of gold bullion, and are being charged storage fees on that fantasy bullion, but they really own unsecured gold loans to the banks at a negative interest rate.



There is nothing new about this. Morgan Stanley paid several million dollars in 2007 to settle claims that it had charged 22,000 clients for storage fees on silver bullion that didn't exist.



Imagine now that you are one of these people who think they own billions of dollars of gold in an LBMA bank depository. Now you find out that this gold doesn't really exist.



You would ask for delivery of your gold immediately. It would be a "run on the bank."



What about things like ETFs linked to gold? Most of them also claim, as assets, these "deposits" at the LBMA banks.



The entire gold market is complete "ponzimonium," a word popularized by the CFTC's Bart Chilton.



This does not even take into account the tungsten gold bar counterfeit issue, which has emerged over the past year or so.



Imagine that you are an LBMA gold bank -- like JP Morgan, Goldman Sachs or HSBC. Your clients start asking for their gold, which you have been telling them is safely stored in your super-safe depository, but the gold doesn't actually exist. It's not so easy to buy it either, because none of the other LBMA members actually have any gold. Can you see the incentive to deliver a phony tungsten counterfeit instead? You might even ask your buddies in the U.S. government whether there is any gold left in Fort Knox that they could use -- this being an issue of National Security and all.



Four 400 oz. LBMA standard bars were discovered to be tungsten counterfeits in Hong Kong. This set off a wave of investigations, turning up more such phony bars worldwide.



These were very high quality counterfeits. According to some investigators, it appears that the original source and creator of these counterfeits was the U.S. government itself. Some people put the possible number of counterfeit bars out there in the hundreds of thousands!



Let's say you are an Asian or Middle Eastern sovereign wealth fund taking delivery on a few billion dollars' worth of gold bullion. You find out that you were given a bunch of phony tungsten by an LBMA bank, whose original source was the U.S. government itself.



Heck, I'd be pissed. I might even want to do something about it.



(Saturday Night Live approximates the Chinese reaction to U.S. government scams and lies.)



There is an easy way to sidestep all the scams, frauds, and phony nonsense. Take delivery on your bullion, whether a 1 oz. Kruggerand or a truckload of 400 oz. institutional bars. Put it in an independent, insured depository that is not affiliated with any bank. Assay all the holdings for tungsten counterfeits. Then audit it periodically, for exact serial numbers and specified weights.



When will the music stop on this merry-go-round of lies and corruption? Who knows. But you can take your seat now, while they are still easy to come by. I suspect those who do not act in advance will eventually find that they are victims of the Ponzimonium.



What if you don't have any gold, and have no interest in owning any? This could affect you too.



Ultimately, a lot of these "gold suppression" schemes amount to dollar-support schemes. Many of the same games were played in the late 1960s, the days of the London Gold Pool.



The London Gold Pool was an agreement among world central banks to stabilize the gold market at $35/oz. This was really an attempt to stabilize the dollar, which tended to decline in value due to the Keynesian "easy money" policies popular in those days (and today as well).



These Keynesian "easy money" policies have consequences. You can't "easy money" your way to prosperity. Prosperity is built on "hard money" -- money that is unchanging in value.



The London Gold Pool eventually blew up, of course, and the dollar fell to about 1/24th of its original value, hitting $850/oz. in 1980. This dollar decline produced a horrible decade of inflation, during the 1970s. We spent most of the 1980s and 1990s just recovering from that disaster.



Click below for a graph of U.S. Treasury interest rates from 1955 to 2005



View image



Thus, when the "New London Gold Pool" blows up, we might find that the dollar decline that has been going on since 2001 could accelerate dramatically.



You would be surprised how little most big hedge funds know about gold. But they do know the scent of blood in the water. And they learn quick.

[---]

the Chinese are going to be pissed

[FastTadpole]

Quote:The world Largest Fraud: 5.5 Trillion? Time you stood up.
By Contrarian
Published: April 3, 2010

The Gold and Silver Manipulation spanning decades (going back well back into 1980s) has now taken mammoth proportions, one that could bankrupt not just a few banks but entire countries along with their central banks
. Prime in this network are the Bank of England and the FED reserve who have been caught on the wrong side.

In an age of technology, Truth has started to take its stand against the mammoth cartel of the spider web of giant Investment Banks and Dealer Networks who are fronts for the governments and shadowy agencies (Rothschilds and the likes) whom they represent. Truth shall win and they better know this for their own sake.

Hitler spoke proudly about Gold manipulation “Gold is a state policy” meaning anyone found holding Gold will be punished. It is almost as if we are living in Hitler market in the precious metals pit.

For the first time now, the CFTC (The regulator) has a whistle blower testimony to make a legal move against the cartel of JPM and other trader network. In an incredible audio interview, the London based former Metals trader, Andrew Maguire, chronicled the silver manipulation, Trade by Trade in his running commentary to CFTC. This testimony is being ignored and being pushed under the carpet. Am yet to see main stream coverage of this mammoth fraud clinically and brilliantly uncovered by Andre Maguire, who is now a marked man for the cartel. He already has been involved in a Hit and Run case where a speeding car almost took him down. What is even more interesting, the driver has been caught and yet his testimony is still not being published. Why did he do it? Who paid him to do it? None of the details have emerged.

But for those who are on the Internet and can help in letting this be know to all, this is that interview and must be downloaded and kept for records. No one knows when the King Wold News website will be taken down which brought us this interview with Andrew and Adrian. We have already had one extraordinary attack on the website couple of days back through a coordinated DOS attack.

King World News today received more detail about yesterday’s attack on its Internet site, which happened soon after the posting of Eric King’s half-hour interview with GATA Chairman Bill Murphy, board member Adrian Douglas, and your secretary/treasurer about last week’s hearing of the U.S. Commodity Futures Trading Commission.

The major Internet hosting company that maintains the King World News site reported to King World News: “Your hosting account is the target of a distributed denial of service attack. To protect the network resources, we have temporarily placed your Web site behind a network filter. Once the attack has ended, service will be restored to normal. … Computers were attacking your account.”

Those who have not heard the interview of Andrw Maguire, please do listen to this bombshell and make your judgement on why it is not being given the importance in US justice department. This man while guilty along with the others had the nerve to stand up to the cartel.

The century biggest Fraud revealed

At a point within the interview Adrian Douglas makes the point that the Gold Market in LBMA (London Metals Exchange) is to the tune of $5.5 Trillion. And that is Gold contracts cleared only in London. Imagine COMEX when added to those volumes. We are talking of a market which is more than the economy of China and nearly 60% of US economy.

That market was closer to a few Billions in 1997 as noted by this article published in FT.

Literally at the crack of London dawn on January 30, 1997, the London Financial Times printed the following:

Deals involving about 30 million troy ounces, or 930 tonnes, of gold valued at more than $10 billion are cleared every working day in London, the international settlement centre for gold bullion.

This is the first authoritative indication of the size of the global gold market, and was revealed yesterday by the London Bullion Market Association.

With the blessing of the Bank of England, the association overturned years of tradition and secrecy to provide statistics illustrating the size and depth of the London market.

The volume of gold cleared every day in London represented nearly twice the production from South African mines in a year, Mr. Alan Baker, chairman of the association, pointed out.

It was also equivalent to the amount of gold held in the reserves of European Union central banks.

The size of the gold market will surprise many observers, but traders insisted the association’s statistics were only part of the picture because matched orders are cleared without appearing in the statistics. Mr. Jeffrey Rhodes, of Standard Bank, London, said the 30m ounces should be “multiplied by three, and possibly five, to give the full scope of the global market”.

Mr. Baker said the association would produce average daily clearance figures every month. “They will provide a useful benchmark for comparison and analysis of trends in the volume of the global bullion business,” he predicted.

He denied suggestions that the move might drive business away from London by upsetting clients who preferred secrecy. “These figures do not in any way affect the confidentiality of the market. While discretion and integrity will always be bywords in the London bullion market, the LBMA is nevertheless conscious of the general call for greater transparency in markets.

“The statistics demonstrate the prominence of London in the world of bullion, something we have long been aware of but which until now has been difficult to demonstrate with statistics.”

LBMA members were divided over the move. One said he was puzzled. “What will people make of it?” Another said the exercise was “futile” because it did not give a complete picture of bullion market activity.

But Standard Bank’s Mr. Rhodes suggested the statistics would “become the key indicator in the world of gold, providing the numbers by which the market can be monitored”.

Mr. Martin Stokes, vice-chairman of the association, said: “This shows we have a serious market with a lot of depth and deserving of more attention.” The statistics showed, for example, that the 300 tonnes of gold sold recently by the Dutch central bank – a disposal that badly affected bullion market sentiment – was not a large amount by the market’s standards. The association was “making a bid to attract investors’ interest”.

The association also gave details yesterday about the silver market. Roughly 250 million ounces of silver valued at more than $1 billion are cleared daily in London.

It also published the results of a Bank of England survey of turnover that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7 million ounces of gold, worth nearly $3 billion, was traded daily by these market-makers.

The important point note is that the market is not made of Physical Gold but paper contracts exchanged in the form of Futures trades. This gives us the illusion of Price discovery and allows the players in the market to control and manipulate Gold and Silver Prices at will.

The recent hearing at CFTC were already under scrutiny of the cartel as this rather innocuous headline in Wall Street Journal indicates:

Exchanges, Banks to Caution CFTC Against Curbs on Metal Trading

The article continues its rant which can make one angry at even the language being used to describe the ones aho are trying to bring justice to this dark and ill understood market:

One of the staunchest believers in the allegations of gold manipulation—the chairman of the Gold Anti-Trust Action Committee—will testify as well.

But others, including the CME’s Mr. LaSala and John J. Lothian, a commodity trading advisor, futures broker and the head of a well-known markets newsletter, will urge the CFTC not to pay attention to arguments that there has been manipulation.

“Those who believe gold and silver markets are manipulated to keep prices low are nothing more than politically opportunistic rent seekers in my book,” Mr. Lothian planned to say. “They are parasites on the body public profiting from selling fear and seeking political change that will benefit their world view and related market position.”

The CFTC called in a hearing n march 25 2010 post Andrew Testimony, which was to be live cast. Now, there were more than a few strange going ons at the hearing, one of which was that the video feed went dead just as Bill Murphy was about to detail the Maguire story for the CFTC. Here’s the video (that no one was able to see at the time) in which Murphy details Maguire’s charges that massive short positions by HSBC and JP Morgan aimed out flushing out longs occur regularly and predictably, in a coordinated fashion.



The world Largest Fraud: 5.5 Trillion? Time you stood up.
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By Contrarian
Published: April 3, 2010
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The Gold and Silver Manipulation spanning decades (going back well back into 1980s) has now taken mammoth proportions, one that could bankrupt not just a few banks but entire countries along with their central banks
. Prime in this network are the Bank of England and the FED reserve who have been caught on the wrong side.

In an age of technology, Truth has started to take its stand against the mammoth cartel of the spider web of giant Investment Banks and Dealer Networks who are fronts for the governments and shadowy agencies (Rothschilds and the likes) whom they represent. Truth shall win and they better know this for their own sake.

Hitler spoke proudly about Gold manipulation “Gold is a state policy” meaning anyone found holding Gold will be punished. It is almost as if we are living in Hitler market in the precious metals pit.

For the first time now, the CFTC (The regulator) has a whistle blower testimony to make a legal move against the cartel of JPM and other trader network. In an incredible audio interview, the London based former Metals trader, Andrew Maguire, chronicled the silver manipulation, Trade by Trade in his running commentary to CFTC. This testimony is being ignored and being pushed under the carpet. Am yet to see main stream coverage of this mammoth fraud clinically and brilliantly uncovered by Andre Maguire, who is now a marked man for the cartel. He already has been involved in a Hit and Run case where a speeding car almost took him down. What is even more interesting, the driver has been caught and yet his testimony is still not being published. Why did he do it? Who paid him to do it? None of the details have emerged.

But for those who are on the Internet and can help in letting this be know to all, this is that interview and must be downloaded and kept for records. No one knows when the King Wold News website will be taken down which brought us this interview with Andrew and Adrian. We have already had one extraordinary attack on the website couple of days back through a coordinated DOS attack.

King World News today received more detail about yesterday’s attack on its Internet site, which happened soon after the posting of Eric King’s half-hour interview with GATA Chairman Bill Murphy, board member Adrian Douglas, and your secretary/treasurer about last week’s hearing of the U.S. Commodity Futures Trading Commission.

The major Internet hosting company that maintains the King World News site reported to King World News: “Your hosting account is the target of a distributed denial of service attack. To protect the network resources, we have temporarily placed your Web site behind a network filter. Once the attack has ended, service will be restored to normal. … Computers were attacking your account.”

Those who have not heard the interview of Andrw Maguire, please do listen to this bombshell and make your judgement on why it is not being given the importance in US justice department. This man while guilty along with the others had the nerve to stand up to the cartel.

The century biggest Fraud revealed

At a point within the interview Adrian Douglas makes the point that the Gold Market in LBMA (London Metals Exchange) is to the tune of $5.5 Trillion. And that is Gold contracts cleared only in London. Imagine COMEX when added to those volumes. We are talking of a market which is more than the economy of China and nearly 60% of US economy.

That market was closer to a few Billions in 1997 as noted by this article published in FT.

Literally at the crack of London dawn on January 30, 1997, the London Financial Times printed the following:

Deals involving about 30 million troy ounces, or 930 tonnes, of gold valued at more than $10 billion are cleared every working day in London, the international settlement centre for gold bullion.

This is the first authoritative indication of the size of the global gold market, and was revealed yesterday by the London Bullion Market Association.

With the blessing of the Bank of England, the association overturned years of tradition and secrecy to provide statistics illustrating the size and depth of the London market.

The volume of gold cleared every day in London represented nearly twice the production from South African mines in a year, Mr. Alan Baker, chairman of the association, pointed out.

It was also equivalent to the amount of gold held in the reserves of European Union central banks.

The size of the gold market will surprise many observers, but traders insisted the association’s statistics were only part of the picture because matched orders are cleared without appearing in the statistics. Mr. Jeffrey Rhodes, of Standard Bank
, London, said the 30m ounces should be “multiplied by three, and possibly five, to give the full scope of the global market”.

Mr. Baker said the association would produce average daily clearance figures every month. “They will provide a useful benchmark for comparison and analysis of trends in the volume of the global bullion business,” he predicted.

He denied suggestions that the move might drive business away from London by upsetting clients who preferred secrecy. “These figures do not in any way affect the confidentiality of the market. While discretion and integrity will always be bywords in the London bullion market, the LBMA is nevertheless conscious of the general call for greater transparency in markets.

“The statistics demonstrate the prominence of London in the world of bullion, something we have long been aware of but which until now has been difficult to demonstrate with statistics.”

LBMA members were divided over the move. One said he was puzzled. “What will people make of it?” Another said the exercise was “futile” because it did not give a complete picture of bullion market activity.

But Standard Bank’s Mr. Rhodes suggested the statistics would “become the key indicator in the world of gold, providing the numbers by which the market can be monitored”.

Mr. Martin Stokes, vice-chairman of the association, said: “This shows we have a serious market with a lot of depth and deserving of more attention.” The statistics showed, for example, that the 300 tonnes of gold sold recently by the Dutch central bank – a disposal that badly affected bullion market sentiment – was not a large amount by the market’s standards. The association was “making a bid to attract investors’ interest”.

The association also gave details yesterday about the silver market. Roughly 250 million ounces of silver valued at more than $1 billion are cleared daily in London.

It also published the results of a Bank of England survey of turnover that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7 million ounces of gold, worth nearly $3 billion, was traded daily by these market-makers.

The important point note is that the market is not made of Physical Gold but paper contracts exchanged in the form of Futures trades. This gives us the illusion of Price discovery and allows the players in the market to control and manipulate Gold and Silver Prices at will.

The recent hearing at CFTC were already under scrutiny of the cartel as this rather innocuous headline in Wall Street Journal indicates

The article continues its rant which can make one angry at even the language being used to describe the ones aho are trying to bring justice to this dark and ill understood market:

One of the staunchest believers in the allegations of gold manipulation—the chairman of the Gold Anti-Trust Action Committee—will testify as well.

But others, including the CME’s Mr. LaSala and John J. Lothian, a commodity trading advisor, futures broker and the head of a well-known markets newsletter, will urge the CFTC not to pay attention to arguments that there has been manipulation.

“Those who believe gold and silver markets are manipulated to keep prices low are nothing more than politically opportunistic rent seekers in my book,” Mr. Lothian planned to say. “They are parasites on the body public profiting from selling fear and seeking political change that will benefit their world view and related market position.”

The CFTC called in a hearing n march 25 2010 post Andrew Testimony, which was to be live cast. Now, there were more than a few strange going ons at the hearing, one of which was that the video feed went dead just as Bill Murphy was about to detail the Maguire story for the CFTC. Here’s the video (that no one was able to see at the time) in which Murphy details Maguire’s charges that massive short positions by HSBC and JP Morgan aimed out flushing out longs occur regularly and predictably, in a coordinated fashion.



Let me address the cartel if ever they come across my writing: Truth will come out. Your days are counted. You will be taken down.

Every reader of this should make your own judgments on the sequence of extra ordinary events that have occurred from Jan 2010 to March 2010 including the Andre Maguire Testimony, his near Death, CFTC hearing going blank at critical times, and most importantly the forced ignorance of this mammoth Fraud which is being ignored by Main Stream even to the point of not having the desire to look one level deeper into all the Mire and dirt in the Precious metal markets.

http://digg.com/business_finance/The_wor...5_Trillion
http://www.investingcontrarian.com/globa...-stood-up/

[FastTadpole]

Some more insight on the IMF role in this fiasco. The off market sale of gold also supports the theory that India is being groomed to be an economic centrepiece of the so-called 'elites' new world agenda.

Quote:IMF Refuses To Sell Gold It Claims Is Available
By Patrick A. Heller on March 31st, 2010

As I have explained several times, the multi-year publicity over the possibility that the International Monetary Fund (IMF) might sell of part of its gold reserves was really only a tactic meant to help the US government suppress the price of gold.

Early on, the mere threat that the IMF was considering a possible release of gold reserves was successful in driving down the price of gold at least 10%, where it typically took at least three months to recover. The pretext given for such sales changed over time, but always involved unloading about 400 tons (12.9 million ounces) of gold. Until last year, the potential IMF sales never materialized.

By 2009, demand for physical gold was so strong that the threat of a possible IMF gold sale no longer had much impact on prices. Gold’s price would drop only 1-2% and then recover within a few days. To try to have a larger impact, the IMF was forced to actually commit to selling gold instead of just talking about it.

However, even the actual sale of gold could not overcome growing demand. China not only stated that it was willing to purchase the entire lot of gold the IMF was putting up for sale (403 tons or 13 million ounces), but it was ready to pay cash to acquire all of the IMF gold reserves of more than 100 million ounces!

What ended up happening is that the central banks of India, Sri Lanka, and Mauritius purchased just over half the IMF gold in “off-market” transactions. The bulk of these sales went to India, one of four nations that is supposedly the custodian of the IMF gold reserves. There is significant suspicion that this particular sale may have been done to replace prior secret sales of gold intended to help suppress gold prices. It is possible that the gold sale to India’s central bank may have been settled by bookkeeping entries rather than the actual transfer of physical gold.

Since these gold sales to central banks did not have the desired effect of knocking down prices, the IMF suspended further sales. Six weeks ago, the IMF announced that it planned to sell the remaining 191.3 tons (6.15 million ounces) of its gold to “the market.” By trying to make it appear that this amount of physical gold might actually be sold to “retail” buyers, the hope of the US government and the IMF was that the price of gold would decline.

This announcement did not produce enough of an effect at knocking down gold prices. Within 24 hours, the price of gold sank as much as $24, just over 2%, and then almost completely recovered.

In this announcement, the IMF did anticipate that some of the gold might be sold to central banks. At the time, I predicted that little if any of this gold would actually be sold to the general public.

My prediction appears to have been accurate. Last week, Sprott Asset Management of Toronto announced that they had contacted the IMF to try to purchase the entire remaining amount of IMF gold supposedly for sale.

Sprott received $400 million from investors from its initial public offering on February 26 for Sprott Physical Gold Trust (symbol PHYS), the beginning of what is expected to be a much larger fund. This closed-end mutual fund used the proceeds of the stock sale to purchase a large quantity of 400-ounce London Good Delivery gold bars for storage at the Royal Canadian Mint.

This Sprott fund will own specific gold bars, not paper gold. Owners of sufficient shares have the option of turning in their shares and taking delivery of the physical gold bars, with current delivery costs running about 6% of the value of the gold content. As Sprott prepares to sell its next round of shares, it obviously needs to acquire large quantities of physical gold from somewhere. The IMF gold for sale would be a perfect fit as some of it could be allocated to the Sprott Physical Gold Trust and the balance to other Sprott funds.

However, such a sale of IMF gold would not offer the US government or the IMF the opportunity to push down the price of gold. In fact, such a sale would almost certainly emphasize just how strong physical demand really is—with the result that the price of gold could rise! So, it is no surprise to me that the IMF flatly turned down the prospect of selling gold to Sprott.

Another reason why the IMF may be so reluctant to sell physical gold to the public is that its “holdings” appear to have been double counted (required by former IMF regulations) as part of the respective nation’s gold reserves. Should the IMF actually sell gold to the public, that may expose this double counting of gold reserves.

The IMF’s refusal to actually sell gold that it claims it has for sale, when coupled with the evidence of gold and silver price manipulation entered in the official record as part of last week’s hearings by the Commodity Futures Trading Commission, could end up providing a boost for precious metals prices. I had earlier predicted that the price of gold would surpass its early December 2009 record by the end of March 2010. It doesn’t look like that will happen by tomorrow’s close. However, market signals point to a new record high in the very near future. I think my forecast will soon prove right on the direction, though slightly off on the timing.

http://digg.com/world_news/IMF_Refuses_T..._Available
http://news.coinupdate.com/imf-refuses-t...able-0210/

[FastTadpole]

Quote:Exclusive: Second Whistleblower Emerges - A Deep Insider's Walkthru To Silver Market Manipulation
Submitted by Tyler Durden on 04/13/2010 18:31 -0500

A second whistleblower speaks. As the topic of physical delivery has gained prominent attention recently, it is crucial to complete the circle and show how this weakest link in the PM market is (ab)used by the big boys: Phibro and Warren Buffet. Pay particular attention to the analogues between the methods employed in the 90's commodity market and how the PM (and equity) market is being gamed currently. And to think that each new generation of traders believes it has discovered something new...

Background

* As a market maker in silver options from 1989 to 2000 I was present during both the 1994 and 1997 silver events. They were seminal in my education of gamesmanship in trading and how probabilities can come up short.
* Prior to going out on my own, I traded at a small market making firm. When a trader finished training there, he had top-tier options knowledge but was not educated in whom the players were, the fundamentals of the markets, and how probabilities were useless when information was asymmetric. That wasn’t their business, they taught option’s theory. Since I had drunk the kool-aid, I thought fundamentals and gamesmanship were useless in the face of the almighty Standard Deviation model. That was a mistake.

Phibro Early Exercise

* In April 1994, the Thursday before Easter, the trading day ended with a rather unusual run up of 15 cents near the close to finish at 435ish around noon. Options expired that day at 4pm but we weren’t anywhere near the closest strikes (425 and 450) so most of us left. It was a 4 day weekend in the U.S. but silver traded globally, albeit il-liquidly in Asia. Comex wouldn’t open until next Tuesday. My education in gamesmanship started that afternoon at JFK airport as I was waiting for a flight, my first vacation in 5 years.
* My backer paged me at the airport to inform me that someone was exercising the K 450 calls. I scoffed thinking it was a retail sap that was talked into exercising some 5 lot piece by an overzealous broker. “Great I said, let them, the options are out of the money.” And I hung up
* 10 minutes later he had me paged again. “You don’t understand, it’s Phibro exercising.” Again I naively said, “So what, they are energy guys.” But I was curious, “How many? “ I asked. “All of them, five thousand, he replied. Now I was really curious, but still woefully ignorant that it was I who was the sap at the table. “Why would they do that?” and he explained it to me. I nearly shit myself and bent over in the cab vomiting on the ride back.
* Cancelling my trip, I headed back to the office to assess the reality of what would happen, probabilities were no longer important. Survival was important. I had no money and was trading on a $25k note lent to me by my backer.
* We covered by buying futures on my entire short open Interest equivalent of EXPIRED OUT OF THE MONEY OPTIONS in Singapore with a dealing firm. We did this prior to even actually knowing if I was exercised, probabilities be damned. How did I know they exercised? The price covered at was $462; that is how. The 450s were already in the money by 12 cents.
* Phibro exercised all 5k lots. I had a fraction of that but big enough to be carried out on a stretcher had the rest of my position not bailed me out/ performed on Tuesday next week.
* The weird part was, the market stabilized that Tuesday and did not run to “infinity” as it could easily have. We found out later it was because Phibro’s exercise was a no-no and Warren Buffet ordered them to shut the trade down as it was too big of a potential scandal. Especially in light of his coming to Solly’s rescue and lending his good name to fix their most recent Treasury scandal. A couple head’s rolled there if I remember correctly.
* My guess was that the client was a Buffet or Soros type. Someone that would only go to Phibro, as these guys were the best at preventing information leakage, and always aligned themselves with client interests, where as if IB had an order and acted in dual capacity as a dealer, he would potentially front-run the order or stop it out poorly on an exit. Phibro didn’t take other side of their client’s orders. They ran with them, and took care of the clients first.
* Phibro got a big order for a client to buy silver, one that had to be handled expertly, and filled over time, no information leakage would be tolerated. These guys were a prop desk that took orders as brokers once in a while.
* They accumulated options for their own account (K 450C) to piggyback but not front-run the client.
* They must have bought futures for themselves as well as the client with his permission.
* They beat the VWAP by gunning the market on light volumes 1 hour before a 4 day US holiday. [TD: compare and contrast with the daily patterns seen every single day in the endless move up in the S&P]
* They exercised the 450 Calls that day and then lifted the offers of the 1 or 2 OTC metals dealers left open during Singapore hours, running them over during illiquid markets.

Never Again!

* I became infatuated with Phibro gamesmanship and made it a point to understand that particular type of player.
* Libertarian Darwinist that I was I did not blame them. At the time It was a buyer-beware market for big businesses and they did nothing wrong. They took risk and they aren’t bigger than the market. I wanted to play with the big boys, and that was the price.
* For me it was about learning how to read the signs and not be on the wrong side of one of those events again, even if I was not privy to their meetings.

Here is some of what I learned:

* In metals (and energy and anything else with an OTC market) the IB firms have dealing desks along GS, MS, Republic, JPMorgan, Scotia Mocatta, all were essentially broker dealers in precious metals. All had clients: miners who hedged production and hedge funds who speculated OTC. They provided liquidity by taking the other side of their client’s trade and “back-to-backing” them in the futures markets or held onto them in their prop books as counterparty because of something else they saw.
* Their client left resting orders with them in the IB’s Central Limit Order Book (CLOB) which served as good information to trade around for the IB. Sometimes they front-ran the client, other times they go for stops to force the client to puke. Sometimes they’d just make markets, depending on many things. It was poker to them.
* Phibro was different. These were smart guys but they weren’t a dealing bank. They exploited imbalances in markets and took positions. They had ideas. They also took orders for heavyweights who needed absolute discretion. They did not make it their business to fleece their own clients and instead aligned their interests. And they made the banks look like pikers when a client came to them with an order.
* For the next 4 Years I paid attention to how those dealing banks and phibro played the markets. It was all about gamesmanship, Bayesian probability, and knowing your counterparty’s motivation with these guys. Information and misinformation.

Some methods:

* How I.B firms would use a thinly traded floor to print the price that would trigger a massive stop loss in the OTC markets and bury their own clients. Or how they would buy for their own accounts in front of resting limit orders for clients and simply use their clients to stop themselves out if the market printed thru their buy levels. Or how they would use dual representation to show loudly they were buyers on one side of the ring, while they were selling quietly upstairs to other OTC dealers. Trading with themselves in multiple entities, etc.
* An IB with a Commodity Index was in heaven. Prop trading, captive client flow from IB deals and OTC dealing and Brokerage. The good ones knew how to integrate and hedge macro risks, whether to front run their own index clients or get out off their way. “Chinese walls” did not exist in Commods.
* Commods were mostly self regulated and that lead to predatory yet mostly legal behaviour.
* Some of these were necessary to protect their interests with such a small number of players. Some were possibly unethical, but most were legal. Their clients were all big boys who left resting orders with the IBs at their own risk. Clients themselves had to resort to some of the same tricks to keep the IB desks honest, like Coming in backwards, “spoofing”, leaving buy stops to get sell orders filled. The alternative for these clients was to put massive orders in the floor where liquidity was subjective, non continuous and information leakage was massive.

1997- Warren Buffet.

* I got my chance to not get run over in 1997, when Warren Buffet gave an order to Phibro to buy silver.
* Short version. Here is what went down.
* Buffet gives Phibro the order- fact
* Phibro begins filling it as a broker using various OTC dealers as counterparties, and letting the I.B dealers sweat getting out of the risk. - fact
* Phibro buys options for their own account (no exercise game this time tho)- fact
* Phibro buys futures for their own account. – not confirmed.
* One by one the IB dealers start to catch on that this is no ordinary order Phibro is handling. They back away and liquidity gets harder to find.- fact
* Other bigger hedge funds in the small circle of professionals, and other smart firms start getting long.- fact
* Silver starts getting delivered from the Comex vaults. Some of it actually removed. Some of it just “covered with a sheet” for removal. But ounces begin to be removed from the warehouse. Phibro was rumored to be taking delivery and beginning to telegraph fear in the markets to start spoofing the VWAP. Rumor was they had a warehouse in Red Hook where they stored it. Never confirmed.
* Point here is, the saps for the last part of this play were the producers and refiners who were complacently net short and dependent on above ground silver to satisfy delivery requests.
* Producers had been over-hedging for years in this market, as silver was cheap and they had business cash flow issues. It was their habit to sell forward production not yet available to them. And if forced to, they would lease already above ground silver and make delivery, collateralizing it with silver yet to be mined. Their positions were habitually synthetically long the contango as they rolled their deliverable production further and further out the curve in an attempt to squeeze much needed cash (cost of carry)for their businesses. The net effect was that sometimes they had to borrow silver for prompt delivery while they rolled their production hedge back further. – my interpretation of what I learned. May not be accurate to the “T”, am not a physical guy.
* Example: in 1995 a miner has silver due above ground in 1997. He hedges it in Z-1997 contract. Z 1997 comes and if he doesn’t have that silver available for some other reason; he covers the short and rolls it back. How much he needs to do this is a function of his obligations, cash flows, and his greed for carry. If leases are cheap, he will seek to capture all the contango and lease it until he gets the silver available.
* If lease rates go up, it is not unlike a miner strike. Silver is needed for delivery now, and term risk becomes the issue. Contango collapses and market goes backwardated. He will be forced to sell the contango to get that prompt silver short back if he cannot make delivery. He has to defer delivery.
* These guys were dependent on the specs NOT taking delivery for years. Specs didn’t have balance sheets to take and store physical metal. Specs usually were the weak hands at futures expiry.
* But then…..Entities that stored silver in bank vaults (like the Republic vault) begin to remove silver from the available pool for leasing. This made the “easy money” portion of production financing no longer easy. Think: smart money getting the word that a squeeze was on and playing along with it.
* Phibro (and others) start selling the contango in the futures market to prepare to take delivery of even more contracts. Or at least put pressure on the producers who had front month shorts they would have to make a decision on delivering. Phibro KNEW that the producers had to sell the spreads to get their shorts back. But they couldn’t lift their shorts altogether as part of their financing deals with their bankers. Their own positions were now breaking down in every way except flat price. The market really didn’t move much. This let them stay in denial.
* Buffet announces he is long and intends to take delivery of silver. Contango collapses. Market spikes to 7.40.
* Rumor is gov’t intercedes and asks Buffet to not do this, it would break the industry. (Kind of like how the exchange begged the gov’t to help it shut down the Hunt Bros.) He says ok, and agrees to lend then their silver back to them. Essentially charging them 40% interest to delay delivery for a year.

What to look for:

* Find the overleveraged/ extended party- and you will find the weak hand at the table. (Producers in 1997)
* Tail wags dog: if the pricing venue trades smaller volume than the OTC, then manipulate price with small volumes to execute trades with big volumes favorably. (OTC vs Comex floor)
* Divide and conquer- if counterparties are undercapitalized and/ or fragmented, then it will be easier to get them to move like a herd. (happens in options ALL THE TIME at expiration)
* Manipulate data- take delivery of metal, take risk off books, manipulate MTM data.
* Create an exit strategy- a good catalyst like Easter weekend, an announcement by an investor etc. or develop a market and grow your own bigger fool. ie – retail.

Comments - So many points to make here:

* How derivative markets can create a problem thru too much liquidity that cannot easily be reconciled by bringing physical production on line fast enough.
* How this works both ways, and that dealing banks have been playing the gold/silver carry game for easy funding of other trades for years.
* How, even though I personally think that what the OTC does is their own business, but the increasing securitization of commodities leaves regulatory arbitrage and OTC games to affect a new generation of ETF buyers, either thru incremental banking or thru contango cancer. That Wall Street salesmen and players with access to both markets retail and professional can exploit the captive audience created with ETFs and other fund type instruments to shear and in some cases skin the sheep.
* That much of this happens because the gov’t is too stupid to see the inherent conflict of interest in what a broker-dealer does. Regulation will not stop gaming the law. Ethics do, and not everybody has ethics. So best you can do is prevent situations of conflict of interest, like the existence of Broker-dealer type entities. Either you trade for yourself, or you trade for others. Period.
* Fact is, if there were retail public in this game back then, the IB firms would have somehow sold them on the idea to BUY contango, or short silver. But the financialization of commodities wasn’t there yet. And the “bigger fool” game stopped at the producers. If it happened again, with ETFs, cross regulatory semi fungible products, asymmetric access to venues and other factors in a global market, the public would be killed, short squeeze or long puke (like in UNG now) take your pick.
* You can never know intentions, and no one is bigger than the market, but the consequences of a lack of transparency and the free reign in which banks can tell half-truths to investors is a big factor in enabling strong hands to fleece weak hands with little market risk. It’s all a con game. And when the IBs figured out how to change the rules, then they were free to use their killer techniques to exploit a million little fish instead of the 10 big fish they usually competed with.
* Phibro was a ballsy cowboy trading firm. The banks at the employee level are as well, but corporately, they first seek to make money and secondly provide a service. When they should be providing a service that makes money.
* Everything that was done I’ve seen done the other way, keeping prices low, shaking out weaker players. Rarely does it happen in such a dramatic way. It is usually a series of “short cons” as opposed to Phibro’s home run. It’s all Darwinism. But when civilians are involved as they are now, then it is no longer caveat emptor.
* Instead of taking a million dollars from a hedge fund, these guys take a dollar from a million people now.

http://digg.com/business_finance/A_Secon...er_Emerges
http://www.zerohedge.com/article/exclusi...nipulation


Video :: IMF buy our Gold at $42.20 per ounce using SDRs
July 22, 2009 – 6:33 pm
http://revolutionarypolitics.com/?p=1830

IMF can be vetoed by US government since they have the final say, not sure why they are not, perhaps it is their best intrests or the best intrests of the poeple who backs their power. Funny how the same private banks that are vested in the Ferderal Reserve of New York control the IMF. Why $42.20? Post WWII prices when the gold was deposited were set at that rate and rates have been locked in since.

The IMF has the 4th largest reserve of gold in the world so this is not small change we are are talking about. 3,217.3 tons of gold which each ton translates into 2,204.6 pounds or 35273.6 oz per ton. At $951.20/oz * each ton would be worth $33,552,248.32. Meaning $107,947,648,519.94 USD from a liquidated stockpile. That is a tidy profit of 2254%.

* I calculated this based on 07/26/2009 prices

ref: http://en.wikipedia.org/wiki/Official_gold_reserves

[h3rm35]

Quote:The IMF has the 4th largest reserve of gold in the world so this is not small change we are are talking about. 3,217.3 tons of gold which each ton translates into 2,204.6 pounds or 35273.6 oz per ton. At $951.20/oz * each ton would be worth $33,552,248.32. Meaning $107,947,648,519.94 USD from a liquidated stockpile. That is a tidy profit of 2254%.

Chris Powell of GATA says most of that's paper like in the LBMA, and that it's being used to scare down inflation (see the second video)



so in essence, that gold isn't real, and is just part of the crazy futures market that is used to control currency values...

I'd assume that the IMF isn't vetoed by the US Gvt. because JP Morgan is a registered agent of theirs and is utilized to smooth over financial difficulties, (this is explained in the first video segment,) and the IMF is involved is the same activities that JP Morgan is... That is, keeping gold and silver prices lower so that the dollar is still valued above the price of the paper it's printed on.