Oh, so blatant

15/05/2010 by Philinje.

Friday was very interesting. Gold knocked right against $1250 before NY trading opened and made it through 1000 Euro. Given the nice run up with very little push back over the past few weeks, it made sense that manipulation would rear its ugly head again.

This is speculation, mind you. There are various commentators like Ted Butler and Ed Steer who paint a very detailed picture of how this manipulation works, based on public facts, but that’s not my thing. I just see what happens in the markets. Over the course of this bull market, it’s been painful to experience the thrashing that occurs by some large interests.

And lately, that behavior has been muted if not absent. Maybe the fact that the CFTC is starting to pay attention is one factor. But I suspect that the intensity of buying is just making it harder to play games.

Regardless, one would expect a test of 1000 Euro to be repelled with some profit-taking. Same with $1250 gold. But to see gold drop $30 in about a half hour, while the Euro was crashing and the stock markets were swooning, is just blatant. The manipulators figured that they could play several factors to their advantage - the rising dollar, obvious resistance at 1000 Euro, the line in the sand at $1227, and a Friday when traders naturally take money off the table.

Their game is to run stops on the way down, and as the price cascades the small guys panic. If they time it right, a little push can accomplish wonders. In this case the goal was to make gold close below $1227, causing everyone to assume that gold couldn’t hold its new all-time high as a weekly close.

Well, here are a few noteworthy observations:

1. This manipulation has been appearing less and less frequently. Quite frankly, the total commercial short position is so large that their powder must be running dry, meaning they have to pick their fights more carefully.

2. Lately, it’s not working. After the straight drop down, buying stepped in and gold ended a small amount lower than Thursday’s close - and most importantly, above $1227.

3. Gold mining stocks were not nearly as volatile as one would have expected. Yes, they spiked down a bit, but they recovered nicely and ended slightly up. Considering what was going on generally in equities, that’s mighty impressive. And in the old days, meaning a year or more ago, gold stocks would have reacted violently to a big down spike in gold.

So, in summary, it didn’t work.

Just a note on equities: the bounce up seems very weak indeed. The Euro ended below its spike down a week ago. It seems Mr. Market is turning tide. However, there may be another mild bounce up, then a bigger move down, and then a big move up, taking us out to mid-June, before chaos ensues.

Be careful.

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